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MGM’s preplanned bankruptcy OK’d

By Associated Press
December 3, 2010

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LOS ANGELES — Metro-Goldwyn-Mayer Inc. said yesterday that a bankruptcy court has approved a prepackaged plan in which lenders will exchange nearly $5 billion in debt for ownership of the movie studio responsible for half of “The Hobbit’’ films.

The two-part series is to go into production in February.

Approval by the US Bankruptcy Court in New York clears the way for MGM to implement its plan this month and emerge from Chapter 11 protection quickly. Last year, Stephen Cooper, a restructuring expert, joined the company as co-chief executive.

MGM won approval last month to arrange $500 million in financing after exiting bankruptcy protection to fund movie and TV production. MGM is on the hook for half of the Hobbit budget, estimated at $530 million to $550 million. The other half is due from Warner Bros.

Cooper said the approval is an important milestone that “will position MGM to be a successful studio going forward.’’ Cooper will step down when lenders take over and be replaced by Spyglass Entertainment’s Gary Barber and Roger Birnbaum, who will serve as cochairmen and co-CEOs.

The company has largely determined its board. Barber and Birnbaum are to take seats along with three members from lenders Highland Capital Management, Solus Alternative Asset Management, and Anchorage Capital Group former MySpace copresident Jason Hirschhorn; and former CBS Corp. chief financial officer Fred Reynolds.

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