The Hobbit saves MGM
Well, this is an over exaggeration, as despite the doom sayers for the company suggesting it was close to collapse, it seemed that they actually had enough cash to keep going for a good year. Now though they also having the backing of their lenders to stick with The Hobbit.
However this isn't the good turn story that it seems as the studio's equity is still going to be handed over to the lenders who will most likely auction off the assets.
Those assets are things such as the production stake in The Hobbit, the Bond franchise, and even The Pink Panther rights. So perhaps there's some good story to be had in with the bad here.
According to The Hollywood Reporter the deal presented to the lenders has been accepted, and that means that interest payments on the loans that are outstanding to MGM are being held back for three months, giving MGM some US $50 million to invest in The Hobbit films.
This money is really to secure the 50% investment in The Hobbit that MGM has, not to ensure it gets the box office returns, but to ensure that the company looks even stronger in its assets.
According to The Hollywood Reporter that doesn't mean that there are good things ahead for MGM, in fact it looks pretty bleak.
”A banking source said some of the tweaks to debt terms will begin to dilute those owners' current equity. A much more dramatic shifting of equity is expected over coming months as lenders agree to convert debt to equity.
Once the lenders become owners, that group likely would conduct an auction for the assets. Nobody sees the lenders group as a long-term operator of MGM.”
Now I'm no expert, but that suggests that other companies will have a chance at buying up the franchises they currently hold onto, or perhaps buying MGM as a complete entity, and after that who knows if they'll strip it or run it.
The immediate future may look good, and for the investors even better, but for the audience? I'm not so sure.