By Michael Goldstein
By Dennis Romero
By Sarah Fenske
By Matthew Mullins
By Patrick Range McDonald
By LA Weekly
By Dennis Romero
By Simone Wilson
MGM Fights To Survive
And you think your monthly credit-card payments are steep? Faced with $3.7 billion in debt due in July 2012, beleaguered MGM will pay $250 million in interest alone by April 2010. Just think if that money could be spent on actual film production.
Shame on Harry Sloan, who has been running the moribund studio ever since 2005, when Sony and Comcast and Providence Equity Partners and TPG Capital paid roughly $5 billion in debt and equity to acquire then–publicly traded MGM from its majority owner Kirk Kerkorian. But Sloan waited, and waited, and waited to put MGM on firm financial footing. Then, the credit crisis began.
Now I hear his production boss Mary Parent is helping to make that happen, after nagging everyone to get ahead of this coming 2012 crisis with the intent of freeing up the company from some of the long-term debt to allow additional capital to finance more productions for her. The good news is that MGM (a private company so, frankly, it can claim anything it wants to without fear of the SEC) isn’t going out of business right this minute. Not with a library that throws off half a billion dollars annually.
In fact, the studio is making movies. And it reported May 14 that it made its numbers for last year and is current on its debt payments. I’d love to believe this. Even more, I’m relieved the studio is coming clean about its problems after I’d been hearing for the past month that MGM debt holders and equity stakeholders have been fighting to the point where both sides are “on a war footing.” That’s been exacerbated by the coming audit this summer to identify whether projects are really under way in film and TV. The fear is, if the auditors were to represent that the studio isn’t a going concern, that would bring on a battle royal.
There are rumors that both corporate raider/shareholder activist Carl Icahn is circling to buy the company as well as Relativity’s hedge-fund backer. And then there’s the chatter that the deal with Merrill Lynch to finance production at MGM’s UA is “hanging by a thread.”
What I and other journalists had reported about Goldman Sachs trying to come to the rescue is still true. GS has been helping to raise more capital. I’m told that one possibility explored was that MGM would sell off United Artists. (The cash from the sale would have been used for operational needs at MGM. But the banks that relied on that asset would have to sign off on such a deal.)
Now investment bankers Moelis & Co. have been hired to advise the studio on a potential restructuring and to explore options for optimizing its capital structure (i.e., talking to lenders about altering MGM’s long-term debt obligations). “You lower your interest payments, you free up cash to make more movies,” a source tells me. “With debt selling at a discount [50 cents on the dollar], every company is doing the same.”
I hope this new plan of attack can help. Because it’s vital to Hollywood that this buyer survive. Everyone knows that Mary Parent has been holding the studio together with the equivalent of chicken wire: specifically by partnering with studios left and right because they are willing to front the costs of each production. Things aren’t much better on the TV side. And if the auditors declare MGM technically insolvent, all hell breaks loose.
William Morris Lays Off
WMA’s urge to merge with Endeavor has now hit Hollywood’s oldest talent agency hard. In one fell swoop May 18, the William Morris Agency told 100 personnel they will be let go as of May 31. The firings came the same day that the Federal Trade Commission and U.S. Justice Department informed both agencies it would not hold up the merger by taking any antitrust enforcement action against the sale.
The layoffs represent less than 15 percent of the worldwide William Morris Agency’s personnel but involved some high-ranking, veteran and well-liked agents. And let’s not forget all the assistants, floaters and other support staff who lost their jobs. Meanwhile, there won’t be any wholesale firings at smaller and newer Endeavor because the agency claims it’s quietly made its cuts already.
Thor Casts Unknowns
All along a lot of fanboys on the Internet have been pushing Marvel Studios’ Kevin Feige and director Kenneth Branagh to cast complete unknowns as Thor. I agreed, because the role of the hunky Viking God of Thunder isn’t right for Shia LaBeouf, who gets every other under-25 part in Hollywood. So there was tremendous curiosity when I reported exclusively on DeadlineHollywoodDaily.com on May 16 that Thor has been cast, and he’s Chris Hemsworth, who can currently be seen as “George Kirk” in J.J. Abrams’ Star Trek reboot.
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