Carl Icahn makes play for MGM debt

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In an effort to scuttle the pending Chapter 11 bankruptcy reorganization plan which would have Metro-Goldwyn-Mayer (MGM) managed by Spyglass Entertainment and instead have MGM merge with Lionsgate Entertainment, investor Carl Icahn has offered to buy up a big block of MGM’s $3.7 billion in debt.


Icahn announced Thursday that he would pay 45 cents on the dollar for $963 million in face value of MGM’s senior debt. The offer, however, is contingent upon the Spyglass deal being voted down by the creditors. Icahn, who is already a significant MGM debt holder, has called the MGM/Spyglass plan a “prescription for disaster.” Icahn has structured his offer to give the senior lenders the right to “put” their MGM loans to him at the 45 cents on the dollar basis from October 29th until two weeks after MGM emerges from bankruptcy or for one year, whichever comes first. Should the loans become worth more than 45 cents per dollar the lenders would not have to sell them to Icahn. The famed corporate raider has also reserved the right to accept more than $963 million in face value of those loans, but is not required to.

Despite his battles with Lionsgate’s board and management over his attempts to acquire a majority stake in the company, Icahn has aligned with that same board and management in pressing for the merger with MGM.

In fact, Icahn won another round this week in his court battling with Lionsgate’s board. A court in British Columbia, Canada, where the company is incorporated, on Monday (10/18) struck down a poison pill provision designed to keep Icahn from increasing his stake in Lionsgate. An earlier poison pill measure had also been thrown out by the court.

RBR-TVBR observation: Should be an interesting battle. Chapter 11 plans are seldom voted down, but this could well be an exception. Debt holders could well decide that they would like either to sell to Icahn for the sure thing of 45 cents on the dollar or vote “no” with him because they’re rather have stock in the merged Lionsgate/MGM than MGM alone.


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