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Compa_Mighty
Dor-Lomin
May 10 2010, 2:00pm
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MGM News: Creditors Ask Media Executives for Advice, Possibly Help Running Film Studio
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Hello, I thought this Wall Street Journal article was very important news, as it really explains where MGM stand now.
MGM, buckling under a nearly $4 billion debt load, wants lenders to grant a waiver on debt payments until at least the end of June and perhaps longer, these people said, adding that details haven't been hammered out. MGM's current waiver expires at the end of next week. The creditors' committee, led by J.P. Morgan Chase & Co. and hedge funds Anchorage Advisors and Highland Capital Management, is negotiating a plan to take control of MGM through a debt-for-equity swap, the people said. The plan would be implemented through a "prepackaged" bankruptcy, lining up many creditors' approval prior to an actual filing. Those creditors have sought advice from other media executives on how to restructure the studio and potentially to manage the restructured company. Those they have met with include: former News Corp. executive Peter Chernin, former Viacom Inc. executive Jonathan Dolgen, Spyglass Entertainment executives, Revolution Studios founder Joe Roth, Qualia Capital managing partner Amir Malin and Liberty Media Corp.'s Overture Films CEO Chris McGurk, they said.
Emphasis is mine.
What this means for The Hobbit: It's not good. Unless The Hobbit rights are treated as a separate thing from the package, this could take a while. First, the "perhaps longer" in the waiver means this could take months to sort out... just in its first phase. The debt to equity swap, and the fact creditors are looking for advice on Media Executives doesn't look too good either.
It basically looks like managers from hedge funds will end up with control of the company, leaving people with no knowledge of movies and who seek high returns in charge. Sure, there are the media executives, but they'd be reporting to the hedge funds.
The plan would be implemented through a "prepackaged" bankruptcy, lining up many creditors' approval prior to an actual filing.
This doesn't sound good either, as it only means procrastinating additional months, waiting to see who wants it, who doesn't, how that affects the plan, and then, finally, filing for bankruptcy and chaging debt for equity.
Sorry for being the bearer of bad news, but I believe this article, focused solely on the economic aspect of the problem, paints a much clearer picture of what MGM's actual state is.
The bleak beam of hope.... meanwhile Warner's CEO, Mr. Bewkes added on Wednesday:
Time Warner doesn't need MGM but a deal "could make sense" at the right price.
The article seems to imply WB isn't completely out of the matter.
Here's to Del Toro becoming the Irvin Kershner of Middle Earth!
Essay winner of the Show us your Hobbit Pride Giveway!
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Silmaril
Nargothrond
May 10 2010, 2:25pm
Post #2 of 95
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sounds like the situation will not change for months. depressing.
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chrism628
Nevrast
May 10 2010, 4:46pm
Post #3 of 95
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and depressing! I might as well cast aside my excitement for The Hobbit movies for awhile and look forward to the Game of Thrones series on HBO soon to come. Woo!
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Patty
Elvenhome
May 10 2010, 4:53pm
Post #4 of 95
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Well, just because they want this waiver
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doesn't mean they'll get it. Other studios may want to be moving on.
Mr. P is not a big Tolkien fan. But he is mourning all of this because of how it impacts James Bond.
Permanent address: Into the West
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Darkstone
Elvenhome
May 10 2010, 5:06pm
Post #5 of 95
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What's interesting is that the clock is still ticking on the rights. If The Hobbit doesn't begin production soon the film rights revert back to Saul Zaentz.
Zaentz has said that he is willing to produce it himself, but only if Jackson directs.
(But of course MGM/UA still holds those pesky domestic distribution rights.)
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"That's not right! That's not even wrong!"
-Wolfgang Pauli
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Voorhas
Menegroth
May 10 2010, 5:56pm
Post #7 of 95
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...though the Hobbit movie seems to be stalling just like Martin's series did!
The HBO adaptation looks very promising, though.
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Kangi Ska
Gondolin
May 10 2010, 6:02pm
Post #8 of 95
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WB could chose to proceed and sort out distribution later.
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I am sure they would rather start production than lose the project. $$$$$$
Kangi Ska
There is no place like the Shire...There is no place like the Shire...There is no place like the Shire...
At night one cannot tell if crows are black or white.
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kareniel
Menegroth
May 10 2010, 6:33pm
Post #9 of 95
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This situation is reminding me more and more of the situation surrounding That Scottish Play -- you know, the one Shakespeare wrote, the one with the curse attached to it, the one whose title is is ill luck to mention. This production, too, seems fraught with ill luck. Every time we move one step forward, the fates shove us two steps back. The anguish! The frustration! O, full of scorpions is my mind, dear sibs!
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Kangi Ska
Gondolin
May 10 2010, 6:38pm
Post #10 of 95
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More like the Golden Goose fairy tale. Lets hope the struggle goes not end with the same results.
Kangi Ska
There is no place like the Shire...There is no place like the Shire...There is no place like the Shire...
At night one cannot tell if crows are black or white.
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Doriath
Ossiriand
May 10 2010, 6:59pm
Post #11 of 95
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From highest high to lowest low?
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Before it was ever announced that Del Toro would direct the Hobbit I was thinking how amazing it would be if he was. Of course Peter would be great too as he had proven himself but I kept thinking, "Oh man, just imagine if GDT was directing" but never thought it was a possibility. When it turned out it was going to be him I had to pinch myself to see if I was dreaming. Not only was there going to be a Hobbit movie but they put my choice of director at the helm! Now I thought, ok, take your time, make it awesome even though it will be hard to wait for it to come out. One of my big concerns for what is currently happening is what if this takes so long to sort out that they lose Del Toro and maybe even Ian? Gandalf ain't gettin' any younger. I'd almost rather there not be a movie if it wasn't GDT or PJ directing. I'd be watching it and all I could think about is how it might have been if GDT.....? Sigh. The only thing that might make up for it is if Bakshi finally made part 2 of his version. Oh well. We always have the books.
The Trees will have their revenge!
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MrCere
Sr. Staff
May 10 2010, 7:04pm
Post #12 of 95
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I would love to know a start-or-lose-it date. Any ideas?
I have no choice but to believe in free will.
The cake is a lie
The cake is a lie
The cake is a lie
My blog
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macfalk
Doriath
May 10 2010, 7:22pm
Post #13 of 95
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I think WB HAS to take this risk - sooner or later. After all, they have 2+ years so sort this up. If not, well, they have thrown money away and they lose their rights for nothing.
Hopefully WB greenlights this after they're done budgeting. Despite the MGM situation.
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Darkstone
Elvenhome
May 10 2010, 7:39pm
Post #14 of 95
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Voronwë might know. He's seen the contract.
But I do know everyone was getting really antsy about time running out when Jackson and New Line were having their feud over accounting practices and that was way back in 2006.
Of course, once the film is greenlit the clock stops and no problem.
But the film can't get greenlit until investors put up the money, and, except for German bankers, I don't see anyone willing to pour money ino a bankrupt studio..
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"That's not right! That's not even wrong!"
-Wolfgang Pauli
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sharku
Menegroth
May 10 2010, 7:45pm
Post #15 of 95
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By "That Scottish Play", I'm assuming...
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This situation is reminding me more and more of the situation surrounding That Scottish Play -- you know, the one Shakespeare wrote, the one with the curse attached to it, the one whose title is is ill luck to mention. This production, too, seems fraught with ill luck. Every time we move one step forward, the fates shove us two steps back. The anguish! The frustration! O, full of scorpions is my mind, dear sibs!
...you mean "MacBeth"?
"Aahhhhh. Hot potato, off his drawers, Puck will make amends. Aaahh. "
Classic stuff.
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duats
Hithlum
May 10 2010, 7:51pm
Post #16 of 95
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WB will give the greenlight without a distribution deal in place. Theoretically speaking, sure, there will be enough time to sort out this stuff during production. But they've already done this before, and it cost them (lawsuit by 20th Century Fox over Watchmen).
Call me a pessimist, and I hope to God I'm wrong, but I just don't see this project being given the official "go" until this situation is resolved.
(This post was edited by duats on May 10 2010, 7:55pm)
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Patty
Elvenhome
May 10 2010, 7:54pm
Post #17 of 95
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If this is something that can be done I think...
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it's crazy NOT to do it. Does anybody honestly think they'd have trouble having someone step up to distribute this thing?
Permanent address: Into the West
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Kangi Ska
Gondolin
May 10 2010, 7:55pm
Post #18 of 95
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I believe we are nearing the point where Warner Bros. will have to act to salvage the situation. Everything can only be realistically held at the ready for so long. There is way to much at stake to allow the project to fail.
Kangi Ska
There is no place like the Shire...There is no place like the Shire...There is no place like the Shire...
At night one cannot tell if crows are black or white.
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Patty
Elvenhome
May 10 2010, 7:57pm
Post #19 of 95
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Yeah, I'm beginning to think it is "one that is cursed". One of my biggest issues is that if the LotR EE blu-ray release is tied to the "promotion" of The Hobbit it will be even more of a curse than it at first appears.
Permanent address: Into the West
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duats
Hithlum
May 10 2010, 7:58pm
Post #20 of 95
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What are WB's interest in MGM aside from The Hobbit rights (if any)? If WB is legitimately interested in MGM's collective library as a whole, I'd see them upping their bid. But if they're just out for the Hobbit rights, well, there's only so much they can realistically spend on one property. $2+ billion dollars for the distribution rights of two films? Not gonna happen.
And quite frankly, I'd be shocked if a deal is worked out in which WB walks away with the Hobbit rights. Those are THE single trump card that MGM has, now that Bond is out of the mix for the time.
(This post was edited by duats on May 10 2010, 8:00pm)
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Darkstone
Elvenhome
May 10 2010, 7:58pm
Post #21 of 95
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Look at what happened to Watchmen
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Though 20th Century Fox argued it had an interest, Paramount went ahead and filmed it. 20th Century Fox waited until after the film wrapped and sued and kept it from distribution. Needless to say Fox had Paramount over a barrel so Paramount had to gave away the farm just to get the movie out and start paying back creditors.
Remember, virtually all films are made with borrowed money. And once the money is borrowed interest begins accumulating. Letting interest build up while waiting for legal arrangements to get settled is economic suicide.
******************************************
"That's not right! That's not even wrong!"
-Wolfgang Pauli
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Kangi Ska
Gondolin
May 10 2010, 8:05pm
Post #22 of 95
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But the distribution problem is with MGM
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What ever entity assumes ownership of MGM owns the distribution rights unless they chose to sell them. It seems to me that this need not necessarily involve WB at all. Problems would come if WB attempted to distribute in violation of the contract.
Kangi Ska
There is no place like the Shire...There is no place like the Shire...There is no place like the Shire...
At night one cannot tell if crows are black or white.
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Voronwë_the_Faithful
Doriath
May 10 2010, 8:07pm
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Sadly, it is not a question of having someone step up, it's a question of rights
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I don't think Warner Brother's needs anyone to step up to help distribute the films; they could do it fine themselves (as they have done for many of the biggest blockbusters in recent years). It is a question of rights; MGM owns some of the distribution rights and Warner Brothers can't violate that. The Watchman example that Darkstone cited if very apt, unfortunately.
'But very bright were the stars upon the margin of the world, when at times the clouds about the West were drawn aside.'
www.arda-reconstructed.com
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duats
Hithlum
May 10 2010, 8:10pm
Post #24 of 95
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The details of the contract between MGM and WB/NL? Is there a clause in the document saying that any studio that comes into possession of MGM's Hobbit distribution rights is bound to the agreement?
If not, suppose a studio comes to possess the rights, and doesn't like the existing contract. Then WB has to rework the negotiations with its new partner, and that could present even more complications.
(This post was edited by duats on May 10 2010, 8:11pm)
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Voronwë_the_Faithful
Doriath
May 10 2010, 8:12pm
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I don't have the agreements handy here (and even if I did I'm not sure that it would make much difference). But my memory is that the Hobbit films needed to be in production in 2010 in order to avoid having the option expire. But what "in production" requires I don't know. And whether the deadline is just sometime in calendar year 2010, or some other date, I'm not sure. When I get home I'll take another look at the agreements and see if I can give any better information.
'But very bright were the stars upon the margin of the world, when at times the clouds about the West were drawn aside.'
www.arda-reconstructed.com
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