MGM hires help in refinancing huge loan

Debt-burdened Metro-Goldwyn-Mayer Inc. is scrambling to refinance a $3.7-billion loan that could help put it back on a footing with the major Hollywood studios.

The once major studio disclosed that it had hired investment banking firm Moelis & Co. to advise the company on efforts to restructure its heavy debt, which largely stems from a 2004 acquisition of the studio by an investor group.

MGM is paying almost $300 million a year in interest and faces a payment of nearly $1 billion in June 2011. The remainder of the loan comes due the following year.

The studio is under pressure to lessen its debt load and continue looking for sources of financing to fund a slate of movies on par with the other studios. Last year, MGM hired Goldman Sachs to raise equity so it could pay down debt. Those efforts failed because of the credit crunch.

MGM currently funds movie production through cash flow from its film library, a $250-million revolving credit facility and by partnering with studios, as it did recently with Sony Pictures on “Quantum of Solace� and “The Pink Panther 2.�

In a Thursday conference call with MGM lenders, Chief Executive and Chairman Harry Sloan tried to assure investors that the company’s cash flow for the fiscal year ended March 31 “was in line with its budget and that the company is in compliance with all loan covenants,� according to a statement by the studio.

MGM’s movie and TV library generated more than $500 million in cash flow in fiscal 2009, down 5% from a year ago, said a person familiar with the studio’s operations.

The company also stated that it was “committed to its business plan, which calls for it to remain independent,� trying to scotch speculation that it is seeking a buyer.

Sloan has been struggling to revive the troubled studio ever since he took over in 2005 after it was acquired by a consortium of investors that included Sony Corp. of America and cable giant Comcast Corp. Last year, he hired former Universal Pictures executive Mary Parent to shift the studio from a distributor of movies made by outside producers to a self-financing production operation. Parent has been developing movies that includes a big-screen version of “The Three Stooges,� to star Sean Penn, Jim Carrey and Benicio Del Toro; two “Hobbit� films; and the next installment in the James Bond franchise.

Because of the strategy shift, MGM hasn’t released a movie since December’s World War II drama “Valkyrie,� starring Tom Cruise. MGM’s next release, a remake of “Fame,� isn’t due out until September.

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