MGM On The Edge of Bankruptcy [Updated]

Published 6 years ago by , Updated July 18th, 2013 at 9:37 am,

mgm logo1 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.

the hobbit bond MGM On The Edge of Bankruptcy [Updated]

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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  1. Does/Will this affect the Stargate franchise in any way?

    • It already has with the cancellation of SGU and the rest of the planned movies. I’ve thought for some time now that SGU was killed by Syfy at the request of MGM because Syfy handled the show so bizarrely that it was out of the norm even for them. Don’t get me wrong, I think Syfy is run by a bunch or crackpots and they are still culpable in killing SGU, but MGM needed money and the easiest way to save some dough would be to kill a long running series. With SGU employing relatively well known actors with larger salaries and the best FX the series had ever seen, and MGM’s ongoing financial troubles it’s pretty clear they had a major hand in SGU’s demise – especially given the fact that the second season was so good.

      MGM needs to sell all of it’s properties because they clearly can’t manage them, and after The Hobbit and Bond 23 are out they need to sell the MGM name to the highest bidder. MGM is, well now it’s more like was, a Hollywood institution. However, it has become increasingly clear they are never going to get their act together and/or get rid of the criminals running it. The absolute only reason they are even being granted these ‘stays’ and extensions is the additional backing from outside studios and the creditors knowing the next two properties will make them bundles of money. Both properties can be made at a more financially stable studio, with less time to see a return, and better budgets. The remaining Middle Earth stories that can be made into films and Bond movies do not need MGM to get made and they won’t.

      I fully expect Stargate to come back in some form on film, whether that’s more SGU, a sequel to the original, or a total reboot. I don’t expect MGM to own the property or be involved in any way when that happens and it will probably be Sony, Lionsgate, or some other studio with a vested interest in the Stargate IP now that will end up with full or co-ownership rights to the franchise.

  2. Hopefully they get this all straightened out. I shudder at the thought of Fox getting The Hobbit or the Bond franchise.

  3. Stargate has been cancelled. Read the blogs. Sorry to say.


  5. I’d prefer almost any option than see MGM go bankrupt. It would be like having a giant hole in every theater screen. :(

  6. oh man if fox got either of those it would be the worst thing in history please god no.

  7. This is sad, way sad. I hope things will get resolved because loosing MGM will be near horrific. They’re living history! Why can’t FOX do us all a favor and get canned?
    Is this true about Stargate because I was thinking about recording the new SG.U. If anyone could clear that up for me it’d be cool.

  8. Stargate Universe is not canceled! It will be on on schedule. That was just some disgruntled Atlantis fan. He’s a nothing, ignore him.

  9. Referring to the question about the distribution rights to The Hobbit, United Artists had tried developing it as a movie at some point and it didn’t work out, but the way Hollywood works, this gave them 50% dibbs on the film’s distribution with New Line. UA was bought by MGM and New Line was folded into Warner Bros., so that’s how MGM got involved. Right now, Warner is guaranteeing the financing and at some point someone will pay MGM’s half just to collect the profits.


  11. Probably for The Hobbit, they wanted the “projected” $500 million – or whatever – in advance && another $200, $300 million for Skyfall and some expenses here-and-there meant they need to fork out a billion dollars within a year. That can be a little MUCH, if you think about it; Hehe. Anyway, looking forward to the movies; & thanks for the article..:)