6:45 PM UPDATE: Now I hear that MGM was surprised by my news about Carl Icahn and their debt today. One of the studio’s insiders tells me tonight: “Carl Icahn is not an approved buyer of MGM debt. He is not on MGM’s approved list. This means if he is buying the debt, it is from a secondary source and has no voting rights attached to it.” Meanwhile, I’m hearing financial types on Wall Street believe it is “likely” that MGM will default on or be forced to restructure their massive $3 billion debt load because the current investors are not willing to re-up. “In either event, Icahn could slide in as a substantial equity holder,” one of them explains.

The conventional wisdom is that Providence Equity and TPG had planned to flip MGM in no more than 3 years time, always viewing the company as a collection of assets and not as a potentially fully functioning studio. MGM may have publicized themselves as bringing back the glory days, but it was only to build the hype which could help others see the company as desirable. The national economic crisis being what it is, now is the perfect time for Providence and TPG to write down debt and flip the company at a loss without it causing a material impact to their books.

1:30 PM: I hear Carl Icahn is also buying a lot of MGM debt at prices as low as 38 cents on the dollar. Meanwhile, the corporate raider/shareholder activist also purchased another 200,000 shares of Lionsgate today. That brings him almost to the 15% threshold. And another source tells me Icahn’s former protégé Mark Rachesky is also increasing his position in Lionsgate “to maintain his edge” with Carl’s.

  1. Carl Icahn Notifies SEC That He May Add Or Remove Lionsgate Board Members
  2. TheDeal.com Also Says MGM Is For Sale…
  3. MGM Now Claims It’s Not On The Block
  4. Goldman Sachs Shopping MGM — Again