Movies News

Fabled studio MGM files for bankruptcy

Nov 3, 2010, 21:45 GMT

(FILE) A undated MGM handout of the MGM Studios Logo. Metro-Goldwyn-Mayer has filed for bankruptcy protection early 03 November 2010 it was announced. EPA/MGM / HANDOUT

Los Angeles - Fabled Hollywood studio MGM filed for bankruptcy Wednesday in a move that will allow the company to continue operations and co-produce two movies based on JRR Tolkien's The Hobbit.

MGM with its famous roaring lion logo was the home of such legendary films as the James Bond series, Ben Hur and the Wizard of Oz, but had been sinking under a mountain of debt since 2005, when it was bought by a consortium of private equity firms in a leveraged buyout.

The Chapter 11 bankruptcy reorganization would allow secured lenders led by Credit Suisse and JP Morgan Chase to to swap their loans of some 4 billion dollars for equity in the company.

Under the plan, control of the studio will be given to executives of Spyglass Entertainment, a smaller Hollywood studio that has had a number of recent hits, including Get Him to the Greek, Star Trek and Invictus.

The court filing came after months of legal wrangling in which one of MGM's major bond holders, corporate raider Carl Icahn, had pressed for the adoption of a rival plan that would have seen the studio taken over by Lionsgate, a studio in which he held an interest. The deadlock was resolved when MGM agreed to changes in its corporate governance policy and to Icahn gaining a seat on the company's board with its planned emergence from bankruptcy in 30 days.