MGM hosted a long, heated conference call with bondholders on Thursday, seeking a $20 million bailout to keep the company afloat, people familiar with the call told TheWrap.
The emergency call came as the studio failed to meet its expected numbers.
A studio spokeswoman confirmed that the call took place and told TheWrap:
"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."
She went on: "MGM’s leadership is aggressively pursuing a course of action that is in the best interest of the company and its stakeholders, and that includes working closely with our lenders to arrive at a solution that enables MGM to achieve long-term financial success. MGM confirms the production commitments we made when we announced our new leadership structure in August."
But the studio is now facing a crisis, trying to convince equity holders to put up immediate cash, and saying that bankruptcy could otherwise loom. That argument works less well with bondholders, who have no equity position in MGM but instead hold debt.
The studio needs the immediate cash to survive the next two months, but the new co-CEO Stephen Cooper told the shareholders that the company needs to raise another $130 million in the coming months.
Harry Sloan was ousted as CEO of MGM in mid-August and the board put in his place a financial turnaround expert Cooper to restructure the company's $3.7 billion debt.
Cooper has won a reputation for helping companies including Krispy Kreme and Enron. He must restructure MGM's massive debt in order to allow motion pictures group boss Mary Parent to make movies, which so far she has been too cash-strapped to do.
MGM has not had a major film since the Tom Cruise Christmas hit "Valkyrie," which took in $200 million worldwide; its current a remake of 1980's "Fame," out this weekend, has already been panned by critics.
Parent has privately expressed frustration that she has films prepped for a greenlight but has not had the capital to move forward with a slate.
On its slate, and currently endangered, are Peter Jackson's "Lord of the Rings" two-part prequel, "The Hobbit," and the still untitled "James Bond 23."
It will, however, begin production in September on "Red Dawn," a remake of the Cold War-era thriller, using funds from United Artists. And it will commence production on "Zookeeper," starring Kevin James, a co-production with Sony. (See accompanying article on MGM's upcoming films.")
Of course, MGM's crown jewel is its 4,000-title library, which includes many of the James Bond films," "Rain Man," "Hannibal" and "The Birdcage."
The crushing load of debt is owed to some 140 creditors, a portion of which comes due as early as 2010. Most of it, which incurs an estimated additional $250 million per year in interest fees, is due in 2012. The studio hired investment bank Moelis & Co. to help restructure the debt with a committee of creditors led by JP Morgan Chase & Co.
At the meeting, Cooper appealed to bondholders to forego any further interest payments.
The equity and bondholders, led by Don Bobbs of Stark Investments, challenged Cooper to detail his strategy for restructuring the company. "There was no strategy," said one person who was on the call.
For the better part of 2009, the company has been trying to close in on fresh capital, with executives routinely saying it was on the brink of securing funds which have not materialized.
MGM, one of Hollywood's most historic major studios, has had a turbulent history in its latest incarnation.
In 2004, MGM was bought by a consortium led by Sony Corporation of America, Comcast, Providence Equity Partners, DLJ Merchant Banking Partners., Quadrangle Group and Texas Pacific Group.
The agreed-upon cost was $5 billion, and from 2005-2006, Sony distributed all of MGM's movies.
But in 2006, the company said it wanted to return as a distribution company and signed deals with many independent companies, including the Weinstein Company and Bauer Martinez. Films that were released included "Lucky Number Slevin," "Bobby" and "Clerks II."
The biggest move in 2006, however, came when the studio brought in Tom Cruise and Paula Wagner to run its United Artists unit.
That reign ended in 2008, when Wagner left, though Cruise still stayed on, in name only, as a producer.