MGM filed a 'prepackaged' Chapter 11 bankruptcy in New York that has approval from nearly all its creditors. Creditors last week approved a plan to forgive more than $4 billion in debt for ownership stakes in the restructured studio and turn over management to Spyglass Entertainment co-founders Gary Barber and Roger Birnbaum.
Dissident creditor Carl Icahn agreed to support MGM's restructuring after the studio made several changes to its reorganization plan. Mr. Icahn will get a board seat once MGM exits bankruptcy. Messrs. Barber and Birnbaum will no longer be chairmen of MGM's new board at the holding company level. And older Spyglass films won't be merged with MGM's film library.
Spyglass, the production firm behind recent films such as the latest incarnation of 'Star Trek' and 'Get Him to the Greek,' had planned to merge some older films for a little more than a 4% equity stake in the studio. But Mr. Icahn protested the films were overvalued.
Mr. Icahn said the changes enabled MGM to 'avoid a potentially costly and disruptive bankruptcy process.' MGM called the changes 'immaterial' and said they would be filed with the bankruptcy court for approval.
MGM said it expects a bankruptcy judge to approve its restructuring in about a month. The studio plans to raise about $500 million upon exiting bankruptcy to fund new films and television shows.
Mr. Icahn had offered to buy out other MGM creditors at a premium to upend the vote on the Spyglass restructuring plan but failed to get enough support to block the deal.
Mr. Icahn has been pushing MGM's most influential creditors to merge with Lions Gate Entertainment Corp., a rival studio that he has been trying to take over all year as its largest shareholder.
MGM's largest creditors have agreed informally to continue discussing a possible merger with Lions Gate. But they stopped short of inserting language in the studio's restructuring plan that would specifically require 'good faith' negotiations, said people familiar with the situation.
MGM, home to a 4,100-title film library that includes the 'James Bond' and 'Rocky' franchises, struggled amid debt taken on in a 2005 leveraged buyout and proved unable to produce enough new movies to keep customers interested in its older films.
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