MGM just issued this statement, which confirms my reporting from July 8th that this would happen. And see my exclusive update below:

MGM STATEMENT REGARDING FISCAL 2009 AUDIT RESULTS (July 14, 2009) LOS ANGELES, CA – Metro-Goldwyn-Mayer Inc. today delivered its March 31, 2009 financial statements to its lender group with an unqualified audit opinion along with a certification that MGM is in full compliance with all of its debt covenants.

EXCLUSIVE UPDATE: Meanwhile, there’s more good news for the struggling studio. I’m told that the Bank of Montreal has come back with a valuation of MGM’s 4,000+plus title library that exceeds the $5.5 billion required under MGM’s term loan. So that library valuation and this audit’s “going concern” opinion will mean no default issues in the near term for the company.

But the studio is by no means out of the woods in the long term. There is still the $250 million revolving credit facility with a maturity date of April 2010 hanging out there. Can MGM in its current financial configuration, be able to refinance that loan? This questioning puts tremendous pressure on MGM execs, especially production head Mary Parent, to conduct “business as normal” as fears mount among 3rd parties this fall and next winter that MGM may be headed to a Chapter 11 filing.

I first reported about the hurdle of the audit of MGM’s activities, especially its TV and movie production slate, back on May 14th when the studio announced it was taking steps to restructure in the face of a total $3.7 billion in debt due in July 2012. For months, MGM debtholders and equity stakeholders had been fighting to the point where both sides were “on a war footing”. Had the audit gone the other way, then thumbs-down could have triggered covenants forcing MGM to declare itself insolvent and/or repay its massive debt. In short, all hell could have broken loose.

Not to mention leaving production head Mary Parent in the lurch after she’s been holding the studio together with the equivalent of chicken wire by partnering with studios left and right because they are willing to front the costs of each film. She also has been making some of the slate with the money from United Artist’s deal with Merrill Lynch. MGM had been arguing that the best way to maintain the value of the studio’s assets was to stay in the production business. And thus allow the $250M revolver debt due in April 2010 to get replenished from MGM’s revenues like box office.

Also breathing a sigh of relief (if he doesn’t get bounced) is studio topper Harry Sloan who took over the moribund MGM/UA 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. Sloan has to live with the fact that he waited until the worldwide credit crisis had begun to try to put MGM on firmer financial footing. Now Goldman Sachs is helping raise more capital. And other 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).

  1. GOOD NEWS FOR MGM: Audit Will Show Struggling Studio Is A “Going Concern”
  2. MGM FIGHTS TO SURVIVE: Desperate To Restructure Crushing Debt Due In 2012