First-round MGM bids due Friday, 12 firms interested

NEW YORK Wed Jan 13, 2010 9:20pm GMT

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NEW YORK (Reuters) - Time Warner Inc, Lions Gate Entertainment and private equity firms are among those weighing potential offers for the debt-ridden MGM studio, but no bids have come in yet, several sources familiar with the matter said.

First-round bids are due on Friday, and the 12 companies that signed MGM's confidentiality agreements to look at the business are expected to make offers, the sources said.

Liberty Media, AT&T Inc, News Corp and independent studio Summit Entertainment, which owns the "Twilight" film franchise, also are among those that have expressed interest, sources said.

But News Corp and MGM negotiations are at an impasse over the confidentiality agreement, one of the sources said. The company, which owns the Fox film studio, remains interested in MGM but has refused to sign the agreement, finding it too restrictive in its current form, the source said.

CBS Corp will not bid for MGM, a spokesman said, contrary to industry expectations. He declined to comment on whether the media company had signed a confidentiality agreement, but two sources said CBS had taken a look.

Private equity firms also signed non-disclosure agreements, two of the sources said. Those firms could be allowed to team with media companies and make joint bids for the studio in later rounds, the sources said.

MGM owns a film library with more than 4,000 titles, including the James Bond and Pink Panther movies, which could be attractive to any number of media companies.

Lions Gate, Time Warner, AT&T, News Corp, Liberty and Summit declined to comment.

The first-round bids are non-binding -- meaning that bidders are not legally bound to follow up on their offer -- and are expected to help MGM assess the level of interest among potential buyers, the sources said.

First-round offers are expected to come in between $1.5 billion and $2 billion, another of the sources said, well below the $3.7 billion in debt the studio owes.

MGM is owned by a group including private equity firms TPG, Providence Equity Partners, DLJ Merchant Banking Partners and Quadrangle Group, and media companies Sony Corp and Comcast Corp. It faces debt obligations stemming from its 2005 buyout by this group, plus payments on a $250 million revolving credit facility due in April.

MGM's lenders also have extended a debt forbearance until January 31, which exempts it from interest payments of an undisclosed amount as it tries to develop a long-term turnaround plan.

If the bids come in too low, MGM's creditors could decide to keep the company and restructure it, possibly filing for a pre-packaged Chapter 11 bankruptcy protection, some of the sources said.

Entertainment-focused investment firm Qualia Capital also has made a proposal to restructure MGM, which would involve converting some of its debt to equity and put in enough money to keep it running, another source said. Qualia declined to comment.

At the time it announced a possible sale, MGM said its other options included operating as a stand-alone entity or forming strategic partnerships.

The sources spoke on condition of anonymity because details of the auction have not been made public.

(Reporting by Anupreeta Das and Jui Chakravorty, additional reporting by Megan Davies and Sue Zeidler; Editing by Derek Caney, Gunna Dickson and Carol Bishopric)

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