Bankruptcy Lessons From MGM’s Own “Happy Ending”

Submitted by Jen Jones on Wed, 12/29/2010 - 3:33pm

Bankruptcy Lessons From MGM’s Own “Happy Ending”

In every film there’s a protagonist, a conflict, and a resolution. And over the years, famous film directors from Kubrick to Polanksi have painted the Metro Goldwyn Mater film lots with many of these three-part cinematic elements—elements that, in the golden age of filmmaking of the 20th century, brought in billions for MGM’s coffers.

Cut to the 2000s, and MGM itself became the protagonist in its own conflict to stay solvent as the famous Los Angeles-based film distributor for Rocky and James Bond, which foundered after piling on debt to go private, sought quiet resolution by filing for Chapter 11 bankruptcy.

But, after a long run in U.S. Bankruptcy Court, MGM has now overcome billions in debts, emerging from the company’s bankruptcy after 18 months with a new structure and poised to once again become a box office powerhouse.

While Chapter 11 bankruptcy proceedings, meant to restructure business debts to move the company forward to a better financial future, are normally meant to be relatively speedy affairs lasting only several months, MGM’s bankruptcy involved a different, more complex plot, with the studio facing creditor complaints that slowed their bankruptcy to over a year.  Despite the snag, the MGM bankruptcy can be considered a “happy ending” for the 86-year-old company and provide valuable lessons for your own business’s bankruptcy script:

(1) Start With a Plan
In MGM’s case, the company and its attorneys entered the bankruptcy with a pre-packaged restructuring plan that rejected takeovers and some creditor protestations, setting out a path on which the company could once again be viable, and, most importantly, profitable. According to Bloomberg, “About 80 percent of its creditors support[ed] a so-called pre-packaged plan to extinguish about $4 billion of debt and install managers from Spyglass Entertainment Group Inc., the producers of “The Sixth Sense.””

(2) Remain Flexible
Despite their plans, MGM faced a minority of dissenting creditors who had different ideas of how the company should repay its sizeable debts. But the storied movie “wheeler and dealer” remained flexible, avoiding a lengthier conflict with these creditors by treating these parties fairly and negotiating terms to come up with a palatable solution for all involved.  While the creditors were plentiful, including a creditors committee that helped negotiate MGM’s debt restructuring Anchorage Capital Group LLC, Davidson Kempner Capital Management, Highland Capital Management, JPMorgan Chase & Co., Invesco Inc. and Solus Alternative Asset Management, the debts were ultimately converted into most, or all of the equity in the reorganized company.

(3) Talk to the Experts
In MGM’s situation, it not only worked with its creditors but also with respected industry insiders in order to generate a post-bankruptcy plan that was more blockbuster than boondoggle.

Like so many industries in this post-recessionary malaise, movie companies have to make drastic edits to their traditional practices in order to keep up. By accepting these changes, talking with experts and analyzing their impact, MGM came up with a strategy that will position the company to be winner at the box office after bankruptcy even as the curtains fall on others in their field.

Are you a businessman or woman who is considering the many safe havens of debt dissolution that a Chapter 11 bankruptcy filing can provide? If you are seeking the broad protections of bankruptcy, it’s best to consult with a qualified attorney before filing. A qualified bankruptcy attorney is important during the bankruptcy process to help you navigate any uncertain waters and work in your best interests throughout the duration of the case, helping direct your own “happy ending.” The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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