Tuesday, August 10, 2010

MGM Nears Potential Deal

Its seems there just might be light at the end of the tunnel for getting The Hobbit films made as rumors are emerging that "Spyglass Entertainment is nearing an agreement to run Metro-Goldwyn-Mayer Inc once the film studio restructures $4 billion of debt this summer through the bankruptcy process." It seems the grand plan is to somehow restructure the debt under Chapter 11 with current creditors forgiving MGM's debt in return for the studio’s equity. Click here for the Reuters article.

I don't have a business degree so don't really understand how it works but it seems the creditors are hoping that the profit potential of the company in the long term will be greater than the current value of the company if they were to cut up its properties piece meal or sell it outright to another studio. Considering MGM has a huge library of movies, substantial franchises like The Hobbit, Stargate, James Bond, Robocop and so many more, there is little reason the company cannot succeed. Pretty much the only reason MGM got into this situation to begin with was a series of poor choices in executives to run the company.

In theory, if everything falls in to place, it sounds like the company may be able to actually restart its core business of making movies once again sometime in October. However, that is a huge maybe as it seems that there are many different stakeholders in this situation, any of whom could kill this and other possible solutions to MGM's financial problems.

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