Judge Approves MGM Bankruptcy Plan

A federal judge approved Metro-Goldwyn-Meyer's Chapter 11 reorganization plan last week, bringing the company closer to exiting from bankruptcy less than a month after filing for protection.

Judge Stuart Bernstein signed off the proposal, submitted on November 3, which involves creditors forgiving some $4 billion in debt in exchange for taking close to full control of the production studio.

The plan will affect over 100 bondholders and lenders who have agreed to the studio’s reorganization plan. Once it exits from bankruptcy, these creditors will jointly hold a 95% stake in the company.

A management team composed of key officers from Spyglass Entertainment will take over organizational control, or the remaining 5% stake in the company, following the approval of MGM.

The plan means getting rid of the company's current companies, which include parties from Comcast, Sony, and a number of private equity firms who acquired MGM in a 2004 leveraged buyout for $4.8 billion.

Jay Goffman, a partner at the law firm handling MGM's case, said in a report to the Wall Street Journal that the company should be able to emerge from bankruptcy in more or less two weeks, provided everything goes as planned.

According to court records, MGM has so far spent around $10 million to its bankruptcy lawyers. Its main advisor, Skadden, has received close to $8.4 million since the studio’s problems started in 2009, including a retainer of $1 million. The firm’s partners can charge up over $1,000 per hour; counsel up to $835, while associates charge as much as $680.

 

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