News Corp Negotiations To Buy MGM “Screeched To A Standstill”

News Corp insiders tell me: “Our negotiations screeched to a standstill Friday night. We’re at an impasse over a highly restrictive (and unusual) provision in their ‘must sign NDA [Non-Disclosure Agreement]’. So who knows what will happen next? But for now it’s ‘Pens Down’.” This isn’t good news for the embattled film studio MGM which has been teetering on the brink of bankruptcy because of its crushing $4 billion debt. So it’s on the block and sent confidentiality agreements to about 20 interested parties last month including News Corp, Time Warner, Lionsgate, Sony, etc. (Also, see my previous EXCLUSIVE: Carl Icahn Buying Up MGM Bonds “Like A Bat Out Of Hell”.)

The NDAs are a precursor to letting potential bidders examine its books. MGM’s debtholders who’ve lost patience with the studio want to break up the company and sell off its valuable library. But other creditors would first like to see how bidders value the company if left whole. So far, this isn’t a traditional sales auction with prospectus, etc. Instead, MGM has been setting up a virtual data room and management presentations to give bidders access to information. That the confidentiality agreements also aren’t standard clearly is hindering the process.

MGM lenders have agreed to extend the forbearance until January 31, 2010 as the studio explores various strategic alternatives — including operating as a standalone entity, forming strategic partnerships, or evaluating a potential sale of the Company. MGM faces debt obligations of $3.7 billion stemming from its 2005 buyout — (by a group including private equity firms Providence Equity Partners and TPG, and media firms Sony and Comcast for $2.85 billion, and assumption of $2 billion in debt) — plus payments on a $250 million revolving credit facility due April 2010.