Debt-laden studio wins agreement for forebearance
The debt-strapped studio announced Thursday that it had won an interim agreement with its lenders to forgo interest due them for the next three months.
The studio will need to pay the interest on Dec. 15. But the agreement gives the studio necessary "breathing room" in the immediate liquidity crunch, said one executive.
In an emergency call with equity and debt holders a week ago, the new co-CEO Stephen Cooper said he needed an immediate $20 million for the studio to stay alive in the coming weeks, and would need to raise another $120 million or so shortly thereafter.
MGM has a crushing $3.7 billion debt, and has not found a successful moviemaking formula. An executive at the company said that MGM made a payment on its debt on Wednesday that was applied to the principal.
Various scenarios are still being played out behind the scenes, according to financial experts, and MGM's future remains far from certain.
In a news release, the studio stated:
“MGM is pleased to announce that the Company has entered into a forbearance agreement with its lender group. The Company is appreciative of its lenders’ ongoing support. Under the terms of the agreement, MGM’s lender group has agreed not to enforce its rights or remedies arising as a result of the Company’s request to not currently pay interest due on September 30, October 31, and November 30, 2009.
"This agreement, which expires December 15, 2009, provides MGM with additional liquidity as discussions continue regarding the development of an optimal capital structure in support of the Company’s long-term business plan. With the agreement in place, MGM has taken an important first step in ensuring that the Company has enhanced financial stability and adequate liquidity to implement its business strategies.”