The Cabin in the Woods

MGM’s parade of CEO candidates seems to have marched down a blind alley.

Jonathan Dolgen, Peter Chernin and Bill Mechanic each have made it clear he has no interest in taking the Lion’s reins despite urgings from studio lenders and the prospect of a recapitalized new ownership structure. At the same time, lenders have been unable to work up much enthusiasm for others interviewed as prospective new CEOs.

Well-regarded executives at Summit and Spyglass have been consulted but failed to convince weary Lion debtholders that their management prowess alone could put the studio back on the path to prosperity. Burdened by a crushing debt load of almost $4 billion, MGM owners tried unsuccessfully to find a buyer for the studio and now seeks to fashion a financial and management restructuring.

The goal: to buy three to four years of solvency in the hope the studio’s value will rise in the meantime.

In a bit of good news, investment films Qualia Capital, Anchorage Advisors and others remain interested in sinking $500 million or more into the Lion in exchange for an equity stake. That would get film chief Mary Parent back into action after movie development and releasing was halted because of the studio’s woes.

An idea gaining currency in the absence of an obvious candidate would be to keep the "office of the CEO" arrangement that’s been in place since Harry Sloan resigned as CEO in August to become non-executive chairman of MGM. Restructuring specialist Stephen Cooper would remain in place longer than planned, with Parent and CFO Bedi Singh maintaining co-CEO roles during a prepackaged bankruptcy to clean up debt.

In the process, studio equity would shift from a current group of owners to MGM lenders and any new equity investors. MGM’s ownership consortium includes Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

J.P. Morgan leads a steering committee representing more than 100 MGM debtholders, though consolidation of publicly traded Lion debt in recent months means one-third of the debt now is held by Highland Capital and a handful of other lenders. Lenders holding two-thirds of the studio’s debt would have to approve any prepackaged bankruptcy.

MGM has the thriller "Red Dawn" set for release in November and the horror thriller "Cabin in the Woods" slotted for January. But no trailers have been shot, and it’s assumed both will be pushed to later release dates.

The situation has been frustrating for those still in the trenches at MGM. But some see a silver lining in the incremental management shifts since MGM’s financial woes reached crisis proportions.

Older-guard executives tended to be too laid back to address the Lion’s increasingly dire challenges, some suggest.

"We’d be sitting in a meeting with all these problems and $4 billion of debt, and we’d be talking about that night’s Lakers tickets," a studio insider recalled. "There was always two MGMs — the old MGM and the Mary Parent MGM. If Mary Parent had her way, the Bond film would come out in November."

MGM’s rights to the James Bond movie franchise represent its most highly valued asset, but the studio recently was forced to postpone development on the next Bond pic until its corporate problems were sorted. A planned co-production with Warner Bros. based on J.R.R. Tolkien’s fantasy tome "The Hobbit" also has been delayed.