Trisha's Take: MGM bankruptcy might not be terrible idea after all

Once upon a time, there was a studio in Hollywood called MGM Studios which had once been three separate studios. Through the studio system, it created a slew of great movies that are considered classics like The Wizard of Oz, Gone With the Wind and Ben-Hur (both versions) as well as the Tom and Jerry cartoon shorts (as created by William Hanna and Joseph Barbera).

Then, TV came along in the 1950s, and while the studio struggled, it also persevered and created a few good series such as “The Man from U.N.C.L.E.” and “The Courtship of Eddie’s Father” and re-invigorated the Tom and Jerry cartoons by hiring Chuck Jones to direct them. It was during this era when people started buying and selling the studio as a whole or parts of the studio and when the studio started relying on big budget tentpoles to bring in the dough for an entire year.

You can follow the rest of this convoluted story by starting at this section of the studio’s Wikipedia page, but it gets a little dizzying. Suffice to say, there are now a bunch of companies and/or banks who lent money to the studio which has lost a lot of money and they want it back.

When we last left MGM, things appeared to be on the up-and-up because the studio had been granted a reprieve from paying back its loans, which meant that anyone who was interested in buying the company had a bit longer to think about it and/or complete their due diligence (aka, investigation into whether or not it would make sense for them to buy a debt-ridden movie studio).

Those same lenders who are being lead by JPMorgan Chase are getting anxious now, says Carl DiOrio at The Hollywood Reporter, and only six of the 12 studios and entities which had submitted non-binding bids have been invited to the second round of bidding. Three of the six were identified as Time Warner, Lionsgate, and Access Industries.

The more I read about this and as I start to see values like $3.7 billion attributed to the amount of debt retained by MGM, the more abstract this whole idea appears to me. DiOrio suggests that half that value is all the company and the lenders could expect to get from a sale and that bankruptcy re-organization is more likely if the lenders don’t like that dollar amount.

At this point in time, if I held a note on MGM Studios, I’d probably welcome the chance to cherry-pick at the film library and try to pick up the pieces that could get me the most value later on, such as the James Bond film library and the rights to re-broadcast Gone With the Wind. When that much money is involved, sometimes it’s just best to cut your losses and run, and apologize to your own investors later.

Of course, there is a concrete human element that I can’t ignore and it’s that of the hundreds of employees who had nothing to do with making the bad artistic decisions that helped lead to the company’s downfall who work at the main branch of the company and would lose their jobs in the worst economic recession of the 21st century. I’m talking about people like Marvin the Mailroom Guy and Administrative Assistant Andrea, not Tom Cruise’s sister, Paula Wagner, who is currently the head of the United Artists division of MGM. But that’s the only reason I would suggest to my fellow lenders that we would accept a low offer, and that’s just not good enough.

In the end, though, I would bet that just because it was one of the original Hollywood studios, there’s going to be another last-minute save or consortium or something that will swoop in and make everything better.

Because wouldn’t that make for a better ending to the movie?

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