MGM Studios Wins Court Approval of Plan to Reorganize

Metro-Goldwyn-Mayer Studios Inc., distributor of James Bond and Rocky films, won a judge’s approval to reorganize under the management of Spyglass Entertainment Group Inc. and billionaire Carl Icahn, removing the last hurdle to emerging from court protection.

U.S. Bankruptcy Judge Stuart Bernstein in New York confirmed MGM’s Chapter 11 plan today, less than a month after the studio filed for bankruptcy. Equity will be canceled, and more than $5 billion in claims will convert to 99 percent of the stock of the reorganized company.

Jay M. Goffman, an attorney for MGM, said at a hearing that there were “no objections of any kind” to the plan.

“Nothing is controverted,” he said. “It is an example of the teamwork and consensus building that is the hallmark of this case.”

MGM expects the bankruptcy plan to become effective in mid-December, the company said in a statement after the judge’s ruling.

“By dramatically reducing MGM’s debt load and providing MGM with access to new capital, the reorganization plan the court confirmed today will enable MGM to emerge from this process with a solid financial foundation and will position MGM to be a successful studio going forward,” Co-Chief Executive Officer Stephen Cooper said in a statement.

Prepackaged Plan

Talks between the company and its debt holders began well before MGM’s Nov. 3 filing of a so-called prepackaged plan to move it through the court in 30 days.

The Los Angeles-based company filed after rejecting a takeover bid by Icahn and Lions Gate Entertainment Corp. It listed $2.7 billion in assets and $5.8 billion in debt, including accrued interest on its loans.

Icahn agreed to the plan after changes were made, including one granting him authority to designate one of nine directors of the reorganized company’s board.

The studio foundered after piling on debt to go private in 2005. It plans to install managers from Spyglass, the producer of “The Sixth Sense.” Gary Barber, founder of Spyglass, and his partner Roger Birnbaum are to serve as co-chairmen and co-chief executive officers.

Three directors from the creditors that helped restructure the company will also serve on its board, according to bankruptcy court papers that leaves two directors unidentified.

New Directors

Patrick H. Daugherty, a partner at Highland Capital Management LP; Christopher Pucillo, founder of Solus Alternative Asset Management LP; and Kevin Ulrich, chief executive officer of Anchorage Capital Group LLC, will join the nine-member board.

Highland, Solus and Anchorage were part of the creditors’ committee that helped negotiate MGM’s restructuring, along with Davidson Kempner Capital Management LLC, JPMorgan Chase & Co. and Invesco Inc.

Jason O. Hirschhorn, recently co-president of social networking company MySpace, and Frederic G. Reynolds, former chief financial officer of CBS Corp., also were named as directors.

MGM, whose 4,000-title film and television library included “The Wizard of Oz” and “Gone With the Wind,” has a co- production deal with Time Warner Inc.’s Warner Bros. to make a movie based on J.R.R. Tolkien’s “The Hobbit.”

Moelis & Co. and Zolfo Cooper are advising MGM, and its legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP and Klee, Tuchin, Bogdanoff & Stern LLP.

The case is In re Metro-Goldwyn-Mayer Studies Inc. 10-15774, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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