Metro-Goldwyn-Mayer, the Hollywood studio behind classics such as Gone with the Wind, has missed an interest payment on its $3.7bn debt pile but has won a short reprieve from its lenders, giving the group much-needed breathing space.
The lenders have agreed to let the studio skip three interest payments while it works on a restructuring. The agreement with the lenders expires on December 15.
The studio said on Thursday the “forbearance agreement” with its lenders would provide it with “additional liquidity as discussions continue regarding the development of an optimal capital structure”.
MGM recently appointed Stephen Cooper, a restructuring expert who oversaw the Enron bankruptcy, as chief executive.
His appointment came after the group parted company with Harry Sloan, the previous chief executive. Mr Sloan had planned to reassert the studio as a production force but failed to raise the required funds.
MGM and its advisers are now considering all available options, including a break-up and sale of the studio, as well as a voluntary bankruptcy.
The company has one of the most coveted film libraries in Hollywood, but is struggling with a steep decline in DVD sales. Meanwhile, the studio’s attempt to re-establish itself as a production force has largely failed, with recent releases, such as a remake of Fame, failing to set the box-office alight.
The company is controlled by a consortium of shareholders but the largest investors, Providence Equity Partners and Texas Pacific Group, have written the value of their investments down to the equivalent of 15 cents on the dollar.
Sony, which owns 20 per cent of the company, wrote down the value of its stake in MGM to zero two years ago.
MGM owns the lucrative James Bond franchise and is in line to make the next film in the series but does not have adequate funding to complete the production on its own. Sony produced the last Bond film, Quantum of Solace, and is likely to step in and make the next film if, as expected, MGM fails to find the cash.
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