MGM On The Edge of Bankruptcy [Updated]

[Update: Just as we thought, MGM's Financial backers are pitching in to save The Hobbit]

One of the biggest and most well-known movie studios out there is Metro-Goldwyn-Mayer, or MGM, known for its classic logo with the lion roaring during the opening credits – an almost expected introduction to many of our movies from the last 85 years.

Well, we may have to get used to some movies without that logo at some point in the near future (at least for a while), as today we get word of very complex financial problems occurring at MGM, which basically boils down to the studio, “teetering on the edge of bankruptcy.”

Nikki Finke over at Deadline Hollywood is reporting a very long conference call (or series of calls that some sources say lasted for six and a half hours) took place between the studio and bondholders, in which the studio made a “desperate plea for money because the studio had missed its numbers and was going to be out of funds very soon.” The bondholders were said to be, “very loud…very upset… [and] irate.” MGM reportedly asked for a combined amount of $170 million, $20 million as short-term cash flow to cover overheads, and a further $150 million to continue funding upcoming projects, including Guillermo del Toro and Peter Jackson’s The Hobbit.

I smell trouble…

MGM has debt of a whopping $3.5 billion, with some saying the company will only sell for half of that at auction (less than 50 cents on the dollar). Nikki Finke reports that the bondholders said to MGM, in essence, “that they were going to let the studio go bankrupt and collect their money since they’d be first in line to get paid.” However, a restructure specialist says that would be pretty much the worst thing to do, since MGM is what the Bond franchise currently calls home, not to mention they are co-funding the highly-anticipated Hobbit film(s).

So what would it mean for The Hobbit and 007? Well, word is that the studio doesn’t think that it could stay alive if it lost the Bond franchise. If Bond did leave MGM, that would mean the franchise having to find a new home. For The Hobbit, MGM’s bankruptcy could mean delays (since it’s co-financing and distributing the film(s) outside of the U.S.). If and when the dust settles, in might all work out okay (we can always hope…) – but that likely means significant disruption to Bond and The Hobbit.

So what can be done about MGM’s dire financial situation? Well, you can read the full ins-and-outs of the whole thing over at Deadline Hollywood, but basically the studio has to formally ask its creditors to hold off interest on that little $3.5 billion debt they have until February 2010, and, of course, the lenders have to say yes. That way, the studio can use that money to fund projects, including Bond 23 and (I think it’s safe to say more importantly) The Hobbit. With regards to the latter, I’m sure another studio would step in to fund it (the project is pretty much a guaranteed money-maker – what moviegoer is NOT going to go see The Hobbit?), but delays would still be very likely, I’d think.

We’ll just have to wait and see how this whole situation turns out, but Nikki Finke’s sources say that they expect the creditors will go the restructuring route as opposed to bankrupting MGM’s. On our side of the fence, as moviegoers, I’m sure you’ll agree that’s the way it should go. Otherwise The Hobbit and the Bond franchise could be in for a rough time.

UPDATE: MGM CEO Steve Cooper was successful in his bid to get financial lenders – including J.P. Morgan – to go the restructuring route, in order to allow the studio enough financial resource and breathing room to proceed with production on The Hobbit. MGM’s partner on the project, Warner Bros., will step up to cover immediate production expenses on The Hobbit and will handle domestic distribution.  MGM hopes to scrounge up the cash by deferring interest fees on their repayment for at least three months, would could net them a predicted $50 million.

For more extensive details on how MGM will bankroll The Hobbit, check out The Hollywood Reporter.

What are your thoughts on MGM’s possible bankruptcy? Let us know in the comments below.

Part 1 of The Hobbit has been set for a while to hit theaters in December, 2011, with Part 2 set to follow a year later in December, 2012.

A production and release date has yet to be set for Bond 23.

Hopefully there will be no delays as a result of this MGM situation, and those dates will remain.

Sources: Nikki Finke (DeadlineHollywood), FirstShowing and /Film

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