Spyglass deal approved by MGM lenders, Ichan offered late deal

MGM lenders have approved, by a comfortable margin, a financial reorganization of MGM led by Spyglass Entertainment, a source told Hollywood Reporter this Friday.

An official statement with details of the vote was expected by Friday evening.

Under the plan that the lenders have approved -- and which now must be filed in U.S. Bankruptcy Court as a Chapter 11 reorganization -- Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum are in line to become co-CEOs of the Century City studio.

The more than 100 MGM lenders voted to give the Westwood-based production company operating control of the studio.

However, in an eleventh hour deal pushed by MGM debt-hold Carl Icahn, terms no longer call for Spyglass to get a four percent stake in the studio and more than a dozen Spyglass library titles were removed from the transaction.

Icahn was also promised a seat on the MGM board.

MGM was due to pay more than $450 million in long-delayed debt payments Friday. But the debt payments become moot once the studio files for Chapter 11 bankruptcy reorganization, as stipulated in the Spyglass plan.

The MGM-Spyglass reorganization plan likely will be filed in U.S. Bankruptcy Court in Los Angeles on Monday.

Lionsgate � with key backing from Icahn � had proposed an alternate plan to merge the film and TV company with MGM. With the Spyglass proposal approved by debt-holders, the only question now is whether the oft-combative and ever-resilient Icahn will continue to press for a Lionsgate merger in coming weeks or even months.

Icahn agreed to vote for the Spyglass plan after winning the concessions, but he still favors an eventual MGM-Lionsgate merger, a well-placed source said.
MGM�s current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- will see their equity positions in the studio wiped out once the bankruptcy process is completed.

For more than a year, MGM has been grappling with ways to reduce or eliminate almost $4 billion in debt. Icahn has acquired notes on at least $400 million of the MGM debt and has offered to buy up more from other creditors.

Eventually, his debt holdings will convert to a large minority stake in the studio in the bankruptcy process. But it�s unclear if that can translate into corporate clout, as MGM is privately held.

The bankruptcy court�s review of the �prepackaged� MGM-Spyglass reorganization plan is expected to take 30-60 days. Assuming Barber and Birnbaum get their mandate, the studio�s first two priorities will be to firm up a 50% interest in the upcoming production of a two-part movie based on J.R.R. Tolkien�s book �The Hobbit� and to restart development of the next James Bond film.

The Spyglass duo also must choose a distribution partner for those and other MGM pics, as they plan to shut down distribution operations at the Lion. Some suggest that Paramount -- as a regular collaborator on Spyglass productions over the years -- is a front-runner for the distribution rights, but others believe MGM will award distribution rights picture by picture, with co-production partner Warner Bros. in line to distribute �Hobbit� pics in any event.

Thanks to `Samuel 001` for the alert.

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