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MGM Preparing For Restructuring Or Bankruptcy; TPG, Providence To Eat $875 Million Equity Loss

Tyler Durden's picture


Even as market optimism rages unabated despite the occasional dip in the market (where everyone on the sidelines is buying, buying, buying GE stock), the economic fundamentals continue souring. The latest casualty - legendary movie studio, Metro-Goldwyn-Mayer, Inc. Well, not so legendary these days, with the only consistently profitable venture to come from the studio being the James Bond series, and alas that's the problem. According to Bloomberg, MGM has informed creditors it will skip a $12 million coupon payment (the technical term here is waived, but good luck if you expect to see one penny of that amount). Moelis & Co., whose restructuring division is comprised of the ex-Jefferies Derrough-Carlston dynamic duo (and henchmen), is advising the firm on what will likely end up being a $3.7 billion debt for equity swap.

“Our discussions with lenders are one step of many in a
proactive and ongoing process to correct MGM’s balance sheet and
position the company to fulfill its business objectives,” the
studio said today in a statement.

Alas, life for Bill and Thane may be a little more difficult than expected, as lenders don't seem to be too happy with going from secured to equitized. Unless the company is able to reach a consensual agreement with lenders outside of court, this could easily become a very messy free-fall (as every restructuring pitchbook likes to point out) Chapter 11.

The proposal was presented this week in a bullet-point
document and discussed on a conference call with MGM management
and creditors, according to the people. The studio formed in
1924 has been trying to raise money to produce new films.
Lenders on the call objected to the proposal, one person said.

Yet the biggest losers in all of this will be the private equity firms that took the company private in 2004. The biggest equity checks were written by: Providence Equity Partners - $525
million, Texas Pacific Group - $350 million, Sony Corporation of America -
$300 million, Comcast Corporation - $300 million, and DLJ Merchant Banking
Partners - $125 million. One at least hopes that JP Morgan and Credit Suisse managed to syndicate their exposure in the firm's multi billion credit facility. One wonders is Mr. Thompson Dean of DLJ Merchant Banking Partners is still around to reap the benefits of his preliminary enthusiasm.

"We believe this landmark transaction -- partnering with two great global
entertainment companies -- is an exciting opportunity for both our partners
and investors," said Thompson Dean, Managing Partner of DLJ Merchant Banking

Probably not.


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Fri, 09/25/2009 - 19:56 | Link to Comment Anonymous
Fri, 09/25/2009 - 20:16 | Link to Comment Hephasteus
Hephasteus's picture

Oh wow. For great justice remove every zig. Every one of those equity partners needs a beating.

Wed, 12/15/2010 - 06:14 | Link to Comment Karston1234
Karston1234's picture

This was actually what I was looking for, and I am glad that I finally came here! This for sharing and keep up the good work...
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Fri, 09/25/2009 - 20:19 | Link to Comment kurt_cagle
kurt_cagle's picture

It looks like even the Bond market is taking a beating these days.

Fri, 09/25/2009 - 20:20 | Link to Comment kurt_cagle
kurt_cagle's picture

Sorry, there was no way that I could walk away from that one.

Fri, 09/25/2009 - 20:27 | Link to Comment SilverIsKing
SilverIsKing's picture

You almost stole my thunder with that one. What I was going to say was, "even James Bond can't get them out of this one."

Wed, 12/15/2010 - 06:15 | Link to Comment Karston1234
Karston1234's picture

This is really a great stuff for sharing.keep it up .Thanks for sharing,
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Fri, 09/25/2009 - 20:52 | Link to Comment deadhead
deadhead's picture

nice job TD.


Fri, 09/25/2009 - 21:18 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

My only wish was, when i saw this article, that Hunter S. Thompson could have been more sane and not pull that trigger back in 05. Fun, it was just 2 yrs in front of him ... Goddammit 

Fri, 09/25/2009 - 21:31 | Link to Comment deadhead
deadhead's picture

amen cb... imagine his writing about the fed? vampire squid?  the list goes on....he probably would have even given up the wild turkey

Fri, 09/25/2009 - 21:45 | Link to Comment Sqworl
Sqworl's picture

CB: Never given up his Wild Turkey or the smokes..

Thu, 07/01/2010 - 21:00 | Link to Comment velobabe
velobabe's picture

cheeks me too.

i don't know what happened that night, i was lying on a surgical bed at AVH, when they brought him in a body bag. it was so screwed up that day. anita was working out at the aspen club. stars, moon everything was misaligned, cause i fucked my life up with gravity,

B I G    T I M E.

he said he just had to much pain. wonder, really wonder what that state would be like.

he truly was the most hysterical person. he would attend the woody creek caucus meetings, his cause was for the little people and not to expand the airport so the big mother fucking gulfstreams couldn't land and own the place. truly battled a good battle. i would almost pee in my pants when he would speak at these caucus meeting. cause his delivery was just classic  h u n t e r . plus my really good friend john oates, Hall and Oates, was a great support. they lived across from each other. don henley down river and jimmy, bipolar,  ibbotson lived uphill. ed bradley lived on my road. when ken lay rented a house from a desperate bitch, next door to ed, i think everybody just had it.  O V E R.

some people had conviction in america. they are dead cheeky.

February 20, 2005 President's day weekend in aspen, all the docs were busy with ski accidents. i got so screwed and got the back orthopedist.

ya know what i absolutely H A T E american holiday, especially 07/04.

Fri, 09/25/2009 - 21:21 | Link to Comment Anonymous
Fri, 09/25/2009 - 21:21 | Link to Comment NoBull1994
NoBull1994's picture

Pretty boy Thane doesn't look much of the investment banker.  Hopefully he has upgraded his staff from Jefferies - that restructuring team was a bunch of retards still confused by four-function math.

Fri, 09/25/2009 - 21:41 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

Knowing Wall Street - they will make moneny on the MGM deal somehow - because as well all know...


Dimons are forever.

*rim shot*

Fri, 09/25/2009 - 22:30 | Link to Comment Lionhead
Lionhead's picture

There's no business like show business...  This great global entertainment company is a turkey in the same fashion as the airline business. Liquidate it and put it out of its misery. It's "roarin" days are long past.

Fri, 09/25/2009 - 23:11 | Link to Comment Anonymous
Fri, 09/25/2009 - 23:31 | Link to Comment Anonymous
Sat, 09/26/2009 - 00:09 | Link to Comment Tyler Durden
Tyler Durden's picture

How have they not be losers on their investments if they have written them down to zero (it doesnt matter if they wrote them down a minute ago or five years ago)?


Sat, 09/26/2009 - 00:49 | Link to Comment Anonymous
Sat, 09/26/2009 - 02:50 | Link to Comment D.O.D.
D.O.D.'s picture

I'm starting to get tired of all the bullish news from zerohedge, Tyler, this kind of info is going to lose you readers...

Sat, 09/26/2009 - 10:46 | Link to Comment McGriffen
McGriffen's picture

It would be compelling to see how the PE firms shake out in a blown deal like did the partners/firm place their own capital at risk or just that of investors (endowments, pensions, wealthy families) into "XYZ capital XX**"

**disclaimer:  heads we win (2 and 20), tails you're fudged as we still got 2

another bad call for TPG...that Wamu trade still gotta hurt

Sat, 09/26/2009 - 12:19 | Link to Comment Anonymous
Sat, 09/26/2009 - 22:38 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

I was going to mention that - they put in, what, $1.5B, in leading a $7B investment in WM, 6 months before it was taken down?

Sun, 09/27/2009 - 10:23 | Link to Comment McGriffen
McGriffen's picture

Numbers sounds good, certainly on the total.  April - May 2008, i believe, when that was closed.  In addition to WM, probably a few sovereign funds that got blitzed on buying finance preferreds (ones not named 'GS' anyway).

Sat, 09/26/2009 - 13:10 | Link to Comment Anonymous
Sat, 09/26/2009 - 19:01 | Link to Comment Anonymous
Sun, 09/27/2009 - 10:21 | Link to Comment Anonymous
Sat, 09/26/2009 - 13:11 | Link to Comment Anonymous
Sat, 09/26/2009 - 19:28 | Link to Comment chumbawamba
chumbawamba's picture

Eh.  A very good friend of mine used to be Chief Engineer at MGM.  They've always been a turkey.  Corporate incompetence was par for the course there.

I am Chumbawamba.

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