For weeks now, we have been hearing from our various sources at studios, agencies and production companies that Spyglass Entertainment is in the lead to run a restructured MGM despite Summit Entertainment also being very much in the mix. But it’s been near-impossible to get any confirmations, so we’ve held back writing. Though we almost posted last week when we received a batch of new and detailed information.
Well, tonight, the Wall Street Journal published that and everything else we’d heard, also with no confirmations. The WSJ emphasizes that talks are continuing and no final decisions have been made. So the paper’s info is exactly where our info is: not pinned down.
Here is where things stand: Spyglass co-heads Gary Barber and Roger Birnbaum would run the studio as co-chief executives under the current restructuring plan being discussed with a group of large MGM’s creditors. But Summit toppers also are still very much under consideration and haven’t heard they’re out of it — at least not yet. I can report that this lead group of MGM creditors consists of Anchorage Advisors, Highland Capital Management, and Davidson Kempner Capital Management who have banded together. Led by Anchorage, they bought up MGM debt on the cheap so that they now represent what I’m told is about $400 million of it. (The WSJ says it’s about 1/3 of the outstanding debt which was purchased for $.60 on the dollar.) They believe that gives them the leverage, with JP Morgan Chase, to decide MGM’s fate.
They’re now convinced that the Spyglass execs have the right stuff to oversee the Bond films, and The Hobbit films, and the 3 Stooges film and other MGM assets after what they thought was a rather convincing presentation which Spyglass gave the group. Their proposals included making the usual mix of low-budget and high-priced films. Summit proposed a merger with MGM that would lead to making its usual mix of low-budget, high-impact movies and eventually an IPO. MGM’s current management proposed the most risky plan by asking for $1B in new money to bankroll a slate of expensive blockbusters.
Who runs the newly restructured MGM is important because the creditors would be swapping their debt for equity in the new company, and the new overseers also would be getting a small slice of the pie. Smaller Spyglass’ piece would be less than larger Summit’s, so that may have been on the hedge funds’ minds. Spyglass is an investment holding of the private equity firm Cerberus Capital Management.
When might a firm decision be reached? Maybe as soon as mid-July. Maybe not until the fall. Time Warner’s lowball auction offer is still hanging out there. We never thought Terry Semel was a serious contender. Peter Chernin has said he’s not interested. (Though one source told us that Fox might want to roll Chernin’s deal into an MGM investment. That’s how badly the studio wants the Bond franchise.)