News has broke that Metro-Goldwyn-Mayer Inc. – the powerhouse behind films such as the James Bond series and one of the oldest film studios in Hollywood is “teetering on bankruptcy” according to sources.
The studio held emergency conference calls at the end of September with worried bondholders who were said to be “very loud and very upset” according to Nikki Finke of Deadline Hollywood. Bondholders, who were concerned about their possible investment returns, requested the calls to assuage their own fears during the worldwide financial crisis, the worst in recent memory. However, MGM are said to have made a desperate plea for money as numbers were down, and the studio is due to run out of funds very soon.
“The implication was that it’s teetering on bankruptcy,” a source told Deadline Hollywood, Finke added:
MGM said it needed $20M in short-term cash flow to cover overhead, and an additional $150 million to get through the end of year and continue funding its projects, and to start Peter Jackson’s Hobbit.
Some say the call lasted 6 1/2 hours. Others said it lasted 2 1/2 hours with lenders, and then the lenders themselves had a conference call that lasted another 2 hours. After the MGM presentation, several bondholders spoke, “and they were irate”, an insider tells me. True, this regularly happens on bad news calls like this. But in this case the creditors who hold MGM’s term loan debt blame Harry Sloan for MGM overpromising and then missing its numbers, which was discussed during the summer and why he was removed as CEO. “They’re not happy that Sloan let the company go in this direction but they understand what’s going on. It’s unfortunate, but they get it that the company is in a distressed situation, and they have to figure out an action plan moving forward,” a source explains to me.
The problem it seems, it that MGM are having difficulty making interest payments on their $3.5 billion worth of debt. Part of MGM’s 11th hour request included a waiving of interest payments until 2010 to allow the studio to use the funds for their future production slate.
However with bondholders already down on equity, they have responded by saying they’d let the studio go bankrupt and in turn collect on their original investments, as they would be first in line to receive payments.
If MGM are forced into bankruptcy they have said they would lose their hold over the James Bond franchise, other properties at risk would include The Hobbit and also MGM’s proposed Robocop remake which was announced last year.
According to Deadline Hollywood, the next stage is for the studio to formally ask bondholder for forbearance. Should bondholders vote in the negative then the result could be catastrophe for certain franchises, the cinema-going public and one of Hollywood’s oldest filmmakers.