MGM's contingency plans (NYT, WSJ)

By Nancy Tartaglione

With a little over a week to go before the deadline hits for second-round bids on MGM, the studio is still considering other options to help reorganize its almost $4 billion debt load. The New York Times reports that those options include a prearranged "stand-alone bankruptcy plan" while The Wall Street Journal refers to the potential move as a "standalone plan in which lenders would convert their debt to equity."

Although MGM has been looking for a way to pay off the debt it took on in a $5 billion leveraged buyout in 2004, its 4,000-title film library and rights to the James Bond series and "The Hobbit" have attracted bids that fall in the $1.5 billion range. The studio had been seeking $2 billion or more.

Among the bidders for the studio are Time Warner and Russian billionaire Len Blavatnik. Other parties looking at MGM's books include Liberty Media, Lionsgate and hedge fund Elliott Management.

Qualia Capital, a media investment firm, has expressed interest in investing in MGM if the studio pursues a standalone restructuring, the Journal said.

The NYT says sources indicate that MGM could file for a prearranged bankruptcy that would involve its creditors taking over the studio in exchange for forgiving their debt.

If creditors opt for the standalone debt-to-equity conversion plan, the company would then sell stock to another investor, people familiar with the matter told the Journal. That investor could come from among MGM's creditors, many of them hedge funds.

The forbearance agreement MGM struck with lenders will expire on March 31 and the company is likely to seek yet another extension of that agreement. But the studio also has to deal with a $250 million revolving credit facility that matures early next month.