August 19, 2009 3:00 am
Metro-Goldwyn-Mayer studios replaced its chief executive with a three-person team that includes a turnround expert, to devise a restructuring plan for its $3.7bn debt pile.
Harry Sloan, MGM chief executive and media entrepreneur, who took over the CEO job in 2005 shortly after the company was taken private by a consortium of investors including Sony and Comcast, will remain as non-executive chairman of MGM.
Three executives will replace Mr Sloan as part of the "Office of the CEO". MGM hired Stephen Cooper, a highly regarded corporate turnround expert who oversaw Enron's bankruptcy as interim CEO and the restructuring of Krispy Kreme Doughnuts in the same capacity. The co-founder of Zolfo Cooper, a restructuring group, was also appointed MGM vice-chairman.
The studio that relaunched the United Artists division with Tom Cruise and owns the James Bond film library was taken private for $5bn in 2005 by a group of investors including Providence Equity Partners, TPG, DLJ Merchant Banking Partners and the Quadrangle Group.
When Mr Cooper arrives at the studio's California offices later this week, he will restart a complete review of the capital structure.
The shuffling was not triggered by a specific event, people familiar with the company's plan said. In July, MGM told investors it was in full compliance with its debt covenants. It faces a $250m payment by April 2010 on revolving credit and a $3.7bn term loan expiring in 2012.
The other two members of the CEO group are Bedi Singh, chief financial officer, and Mary Parent, chairperson of MGM's worldwide motion pictures group who was hired by Mr Sloan to restart the company's film development and production.
"The board looks at this as the best way to position us for the long term," Ms Parent told the Financial Times. The move "gets us one of the best in the world to help address the capital structure".
Ms Parent, one of Hollywood's most well known production chiefs, said the studio's slate of six films, beginning with a remake of Fame , about a high school for gifted performance artists that makes its debut in September, remains on schedule.
MGM has become a poster child for media sector leveraged buy-outs gone awry. Hollywood suffers from a sharp drop in DVD sales, long the profit-driver for studios, and now faces stiff competition from low-cost rental vendors such as Redbox.
Investors such as Providence Equity, which holds the largest stake in the studio at 29 per cent, now values its stake at about 15 cents to the dollar, according to one person close to the investors.
The weak credit environment has also made third party film financing difficult. In one failed attempt, MGM tapped Goldman Sachs last year to seek financing for a slate of films.
By May 2009, the studio hired Moelis, a boutique investment bank, to " explore options " for restructuring its capital structure and had considered debt-for-equity swaps with a committee of some 140 lenders.
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