A prepackaged plan to bail out MGM from its financial troubles was approved yesterday by a New York federal court. Earlier this month, the studio filed for Chapter 11 bankruptcy with the support of investor Carl Icahn for the plan, appointing Spyglass Entertainment's Gary Barber and Roger Birnbaum as co-chief executive officers.
In October, MGM lenders agreed to trade more than $4 billion in debt holding for a collective 95 percent stake in the studio once it emerges from Chapter 11.
The decision results in the rejection of Icahn's proposal in October to merge Lionsgate, another studio he owns a stake in, with MGM. Meanwhile, Lionsgate is suing Icahn for allegedly misleading its shareholders and interfering with its own efforts to merge with MGM and other studios. The new MGM plan, which is subject to approval by the court in 30 days, sees the studio adopting corporate governance changes, not acquiring the Cypress film library (a Spyglass affiliate studio) and gives Icahn the right to appoint a director to MGM's board.
Past offers to bail out MGM also included proposals from Sahara India Pariwar ($2 billion) and Time Warner ($1.5 billion), both of which were rejected.