Faced with $3.7 billion in debt due in July 2012, MGM will pay $250 million in interest alone by April 2010. Just think if that money could be spent on actual film production. Shame on Harry Sloan who took over the moribund studio in 2005 after Sony and Comcast and Providence Equity Partners and TPG Capital paid roughly $5 billion in debt and equity to acquire then publicly traded MGM from its majority owner Kirk Kerkorian. But he waited, and waited, and waited, until it was too late and the credit crisis had begun, to put MGM on firm financial footing. But I hear his production boss Mary Parent is helping to make that happen now after nagging everyone to get ahead of this coming 2012 crisis with the intent of freeing up the company from some of this long-term debt to allow additional capital to finance more productions for her. The good news is that MGM (a private company so, frankly, it can claim anything it wants to without fear of the SEC) isn’t going out of business right this minute. Not with a library that throws off half a billion dollars annually.

In fact, the studio is making movies (see below) while reporting today that it made its numbers for last year and are current on its debt payments. I’d love to believe this. Even more, I’m relieved the studio is coming clean about its problems after I’d be hearing for the past month that MGM debtholders and equity stakeholders have been fighting to the point where both sides are “on a war footing”. That’s been exacerbated by the coming audit this summer to identify ongoing projects, etc. The fear is, if the auditors were to represent that the studio isn’t a going concern, that would bring on a battle royale. And I’d also heard that UA’s Merrill Lynch money was “hanging by a thread”.

Today, sources owned up to me that what I and other journalists had reported about Goldman Sachs trying to come to the rescue was true. GS has been helping raise more capital. I’m told that one possibility explored was MGM selling off United Artists. (The cash from the sale would have been used for operational needs at MGM. But the banks who relied on that asset would have to sign off on such a deal.) Now investment bankers Moelis & Co have been hired to advise the studio on a potential restructuring and to explore options for optimizing its capital structure (i.e. talking to lenders about altering MGM’s long-term debt obligations). “You lower your interest payments, you free up cash to make more movies,” a source tells me. “With debt selling at a discount [$.50 on the dollar], every company is doing the same.”I hope this new plan of attack can help. Because it’s vital to Hollywood that this buyer survive.

First, here is MGM’s statement that just came into me at 11 AM when MGM held a lenders’ call:

MAY 14, 2009 – Metro-Goldwyn-Mayer Inc. is discussing its financial results in a call with its lenders today. The company is reporting that its cash flow for the fiscal year ended March 31 was in line with its budget and that the company is in compliance with all loan covenants. On the call, MGM also will say it is exploring options for optimizing its capital structure and has begun talks with a steering committee of its lenders as part of the process. The company has hired Moelis & Co. as financial advisor to help it in these efforts. The company is committed to its business plan, which calls for it to remain independent, continue its motion picture production and television activities and leverage the value of its film library.

No matter what happens in the long-term, the fact is that in the short-term, everyone understands that the best way to maintain the value of the MGM assets is to be in the production business. And the $250M revolver debt due in April 2010 gets replenished from MGM’s revenues like box office.

Here’s what MGM claims is its current movie slate: Fame is Mary Parent’s first pic at MGM: it’s in post-production with a release date of September 25th. Cabin In The Woods is shooting now and scheduled for February 5, 2010. Hot Tub Time Machine also started in Vancouver for release on February 26th, 2010. And The Zookeeper (a pay or play deal with Mall Cop‘s Kevin James) is in pre-production for a July 23rd, 2010, release.

The rest of the movie slate for 2010 are Poltergeist (Q2/Q3, The Three Stooges (Q3/Q4), Red Dawn (Q3), The Matarese Circle (Q3/Q4), Conjurer Wife (TBD) and Something Borrowed (TBD).

Also on the horizon are the two Hobbit movies produced by Peter Jackson, more of the James Bond franchise starring Daniel Craig, the RoboCop reboot by Darren Aronofsky, and now the possibility of the Terminator deal.

Everyone knows that Mary Parent has been holding the studio together with the equivalent of chicken wire: specifically by partnering with studios left and right because they are willing to front the costs of each production. She also has been making some of the slate with the money from UA’s deal with Merrill Lynch. Whether this convinces auditors that MGM is really in the movie biz, plus what is supposedly happening on the TV side (Stargate, BBC mini-series, etc) remains to be seen. If not, then MGM could be declared technically insolvent. And all hell breaks loose.

  1. Icahn Interested In MGM, Too?
  2. Layoffs And Firings At MGM
  3. Clark Woods Out At MGM Distribution
  4. TheDeal.com Also Says MGM Is For Sale…
  5. MGM Now Claims It’s Not On The Block
  6. Goldman Sachs Shopping MGM — Again
  7. Paula Wagner Is DOA At UA; But Was It Suicide or Murder By MGM?
  8. Another Top Executive Exits United Artists
  9. Hey, Harry Sloan, Show Us MGM’s Money
  10. Hey, What’s With MGM’s Hiring Spree?
  11. Desperate MGM Studios Throws Hail Mary