Metro-Goldwyn-Mayer Studios Inc filed for Chapter 11 bankruptcy protection this week. According to Reuters, the studio and its shareholders had been in talks for a possible merger with Lions Gate Entertainment Corp as one possible strategy for reorganizing the finances of the company, but the bankruptcy filing was chosen as the best option.
The studio with the roaring lion logo has been struggling with debt since it was sold in a leveraged buyout in 2005. The restructuring of the company will entail swapping $4 billion of debt for equity. The secured lenders Credit Suisse Group AG and JPMorgan Chase & Co will gain ownership of the majority of MGM after the swap.
MGM said that its secured lenders and one of its largest debtholders, the billionaire Carl Icahn, decided through discussion to support the Chapter 11 restructuring plan rather than a plan for the studio to merge with Lions Gate.
MGM, founded in 1924, is one of Hollywood’s most distinguished and prominent studios. It counts such classics as “The Wizard of Oz” and “Ben-Hur,” and the Pink Panther, Rocky and James Bond series among the films it had a hand in producing or releasing or now controls.
UPDATE 5-MGM studio files for bankruptcy, Icahn backs plan (Reuters)