Spyglass Entertainment Spies MGM

The Wall Street Journal reports today that Spyglass Entertainment is in serious talks to run MGM "after the struggling film studio finishes resturcturing a roughly $4 billion debt load later this summer." Metro put itself up for sale in November, but nobody really wanted the studio, it's sparse slate of upcoming projects and its rich archive of thousands of films almost exclusively because there was, at the time $3.7 billion in outstanding debt to consider. A new owner would have had to work out a deal with lienholders for a little more than half that much to take over MGM. Now, however, it looks like the clouds are parting. MGM wouldn't have to declare bankruptcy, Spyglass would take a 4% stake in the company and combine its library with MGM's. As a financing company and not a studio, some of those moves might be tricky, so a lot of that depends on the deals Spyglass has with distributors for home video sales and that sort of thing. The bigger news is that Spyglass' Gary Barber and Roger Birnbaum would run the company and in exchange the creditors would abvsolve the debt and take a bigger share in the restructured company's largesse, provided they start making money. This really does seem like the best situation for everyone, because it incentives turning out good, profitable films and keeping the nonsense to a minimum. I don't even know how a company like MGM winds up $3 billion-plus underwater, but with Bond and The Hobbit on the way, those three films alone would probably make back better than 50% of the amount currently owed. If the lienholders get 60% or more (a "majority stake" is all we know about the financials right now), then suddenly, they're making money back at a faster rate than they would have with interest payments. And that sets up future films. Considering no money appears to be changing hands right now (not in the ballpark of the debt payment, anyway), this is a very strong plan. Spyglass has done pretty well over the past few years; it had a five-year deal with Disney back in the late 1990s, which spawned The Sixth Sense. Since that deal expired, the production house has been working all over town.

Comments

[Andy Ball]

According to Forbes business news, the debt under which MGM has laboured for so long was brought about by Sony buying the company from Kirk Kerkorian in 2004, and structuring the deal so that the purchase loan lay with Metro. So cripppling had the debt repayments become, that there was not the money in the kitty to complete movies or make new ones. The world-wide financial crisis didn't help either.
Let's hope Spyglass manage to make something of what remains the most illustrious name and logo in Hollywood.