Hollywood’s MGM puts itself up for sale

Legendary Hollywood studio Metro-Goldwyn-Mayer Inc said on Friday that it is exploring a potential sale of the company as it struggles to deal with looming debt payments and attempts to come up with a long-term business plan.

MGM, whose lenders extended forbearance until 31 January, said its other options include operating as a stand-alone entity or forming strategic partnerships.

Companies mentioned in media reports as potential buyers include Lions Gate Entertainment Corp, Time Warner Inc, and Viacom Inc. Investment bank Moelis & Co, hired by MGM in May to help refinance its debt, will most likely be overseeing the potential sale process.

The studio, which has enlisted a restructuring specialist to help turn it around, faces debt obligations of $3.7 billion stemming from its 2005 buyout, plus payments on a $250 million revolving credit facility due April 2010.

It was purchased from majority owner Kirk Kerkorian for $2.85 billion by a group including private equity firms Providence Equity Partners; Merchant Banking Partners, a unit of Credit Suisse; and Quadrangle Group; and media firms Sony Corp and Comcast Corp. The group also assumed a debt of $2 billion.

Film financing experts said MGM had been funding operations largely through library cash flow and access to $500 million in financing set up for its United Artists label, which is partly owned by movie star Tom Cruise.