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MGM files for bankruptcy

by Shannon Harris on November 5, 2010

Hollywood studio giant MGM filed for Chapter 11 bankruptcy on Wednesday though it will continue to operate normally with court approval.

Metro-Goldwyn-Mayer Studios Inc. listed $2.7 billion in assets and $5.8 billion in debt, including accrued interest on its loans in its filing. The company rejected a takeover bid by Lions Gate Entertainment Corp. and one of its creditors, Carl Icahn.

Ichan, who owns almost 20 percent of the company's debt, had pushed for a merger with Lion's Gate but later supported a deal with SpyGlass Entertainment Group Inc. Spyglass executives, Gary Barber and Roger Birnbaum, will run MGM and will be entitled to a $4 million breakup fee if they suffer any loss or damage from a breach of its agreement, according to Bloomberg.

The company has planned a package to move through the court in 30 days, as it intends to raise $500 million for operations, including new movies and television series.

"We look forward to a quick and successful pre-pack. We not only have the necessary votes in favor of the plan, but with the vote of Mr. Icahn we have almost unanimous approval," Jay Goffman, an MGM lawyer, told U.S. Bankruptcy Judge Stuart Bernstein, who approved the request.

Bernstein set a December 2 hearing date in which MGM will seek a final approval of its reorganization plan.

Included in its filed court papers was a request to keep spending for movies such as The Hobbit, which MGM reportedly needs around $40 million to make, according to NPR.

MGM is the production studio behind popular franchises such as "James Bond" and "Rocky". The studio plans to release a new Bond movie in 2010, according to the San Francisco Chronicle. 

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