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Metro-Goldwyn Creditors Audition Moguls to Run Studio

Peter Chernin
Former President and CEO of News Corp speaks at the World Economic Forum in Davos, Switzerland. Photographer: Scott Eells/Bloomberg News

Metro-Goldwyn-Mayer Inc.’s creditors, unsatisfied with proposals to buy or restructure the debt-laden film studio, have contacted Hollywood executives who may be willing to run it, people with knowledge of the situation said.

Former News Corp. President Peter Chernin, ex-Viacom Inc. executive Jonathan Dolgen and the founders of Spyglass Entertainment met with lenders in recent weeks, said four people who declined to be identified because the talks are private.

Five creditors have amassed 51 percent of Los Angeles-based MGM’s $3.7 billion in bank debt and are seeking advice about managing the studio, said two people. Under options being discussed, the studio would receive $500 million or more in fresh capital, they said. Creditors deemed earlier offers for the studio too low, people close to the talks said on March 25.

“To run a company like this you want to bring in someone with a special skill set,” said Clark Hallren, managing partner of Los Angeles-based entertainment industry adviser Clear Scope Partners. “You would need to show the industry that you are sufficiently capitalized and you want to have a real Hollywood insider who has credibility with agents and talent.”

Extended talks have been held with Spyglass founders Roger Birnbaum and Gary Barber, said one person. The Los Angeles-based company’s production credits include “Star Trek” and “G.I. Joe: The Rise of Cobra.”

Outside offers to buy or restructure the studio are on hold, as is a proposal to restructure under current management led by turnaround artist Stephen Cooper, said one person.

Chernin Role

Chernin has discussed overseeing the studio in a consulting role rather than running day-to-day operations, two people said. The executive, who stepped down as president and chief operating officer at News Corp. in June, oversaw the media company’s Los Angeles-based operations and has a production deal on the Twentieth Century Fox lot.

Allan Mayer, an outside spokesman for Chernin, declined to comment. Birnbaum and Barber, who were traveling, didn’t respond to requests for comment.

The size of any cash infusion will depend on the structure of the new company, its business model and the number of films it makes, said one person with knowledge of the talks.

One possibility to raise money is by selling distribution rights. Summit Entertainment LLC, which produces and distributes the “Twilight” vampire movies, has discussed releasing MGM’s films internationally, one person said.

The process of evaluating options is being run primarily by the five creditors -- Dallas-based Highland Capital Management, Anchorage Advisors, New York-based Davidson Kempner Capital Management, Solus and Goldman Sachs Group, said one person.

Sands, McGurk

Jonathan Gasthalter, a spokesman for New York-based Anchorage, declined to comment. Michael DuVally, a spokesman for New York-based Goldman, had no immediate comment. Messages for Christopher Pucillo at Solus in New York weren’t returned. Scott Wilson, a Highland spokesman, didn’t immediately return a call.

Other Hollywood executives who have met with the studio’s lenders include Revolution Studios founder Joe Roth, now an independent producer, former MGM operating chief Richard Sands and Christopher McGurk, chief executive of Liberty Media Corp.’s Overture Films, who was MGM’s vice chairman and chief operating officer from 1999 to 2005, people said.

Dolgen, who headed Viacom’s entertainment unit until 2004, is a principal with Wood River Ventures. He proposed operating the studio while turning over movie production to producer- directors Tony Scott and Ridley Scott, according to people with knowledge of his plan.

Roth and McGurk weren’t interested in running MGM, said the people.

Bids, Forbearance

Roth’s spokesman, Arnold Robinson, said he couldn’t confirm or deny any meeting. “Joe is very happy doing what he’s doing,” he said.

Courtnee Ulrich, a spokeswoman for Englewood, Colorado- based Liberty, didn’t immediately respond to a request for comment.

MGM put itself up for sale and hired Cooper last year after falling behind on debt. Creditors have waived interest payments since September. They are expected to grant another forbearance when the current waiver expires on May 15, according to a person with knowledge of the situation.

Ryan Kavanaugh’s Relativity Media offered MGM $500 million to make movies as part of a management-led plan, two people said on April 8. Time Warner Inc., based in New York, has bid $1.5 billion to acquire the studio, people with knowledge of the matter said in March. Private equity firm Qualia Capital, led by Amir Malin and Ken Schapiro, has made a restructuring proposal.

Billionaire Len Blavatnik’s Access Industries withdrew its restructuring offer, according to a person with knowledge of the proposal. Michael Sitrick, a spokesman for Access, didn’t immediately respond to an e-mail request for comment.

Buying MGM “could make sense, but only at the right price,” Time Warner Chief Executive Officer Jeff Bewkes said on a conference call this week.

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