UPDATE 1-MGM bankruptcy, Spyglass deal wins OK

* MGM says creditors “overwhelmingly” vote for plan

* Spyglass chiefs to head MGM after prepackaged bankruptcy

* Vote deals blow to alternate Lions Gate proposal
(Adds details from source, MGM statement, Lions Gate bid)

By Sue Zeidler and Alex Dobuzinskis

LOS ANGELES, Oct 29 (BestGrowthStock) – Metro-Goldwyn-Mayer
creditors voted in favor of a bankruptcy plan that puts
founders of Spyglass Entertainment at its helm, dealing a blow
to Lions Gate Entertainment’s (LGF.N: ) merger proposal, a source
familiar with the situation said.

The green light for a pre-packaged bankruptcy scuppers —
for now — an 11th-hour proposal backed by billionaire Carl
Icahn to merge Lions Gate with MGM.

Experts say the activist shareholder could still challenge
the deal in bankruptcy court, and an eventual partnership
between MGM and Lions Gate remained possible.

MGM, which has struggled for years to reduce its debt,
confirmed it had obtained creditor approval for a plan of
reorganization to salvage one of Hollywood’s most legendary
studios, home to the James Bond franchise.

It did not offer more details in its statement on Friday.
But the source said the plan still entailed Spyglass heads Gary
Barber and Roger Birnbaum taking over a slimmed-down MGM.

However, as a concession to Icahn, the investor is likely
to be granted the right to nominate his choice of candidate to
at least one seat on MGM’s board, the source added.

“MGM will now move expeditiously to implement that plan,
which will dramatically reduce its debt load and put the
company in a strong position to execute its business strategy,”
the studio said in a brief statement.

Icahn — an investor in both studios — had lobbied for
creditor support of a bid by Lions Gate, producer of the
popular “Saw” franchise and “Mad Men” TV series.

That late offer marked an about-face from his previous
opposition to such a combination. In another twist, Lions Gate
on Thursday sued Icahn, accusing him of interfering with an
earlier effort to merge with MGM for personal gain.

WHAT’S NEXT?

MGM has struggled with debt since a $2.85 billion 2005
leveraged buyout by a group that included private equity firms
Providence Equity Partners, TPG, Quadrangle Group and DLJ
Merchant Banking Partners, and media companies Sony Corp
(6758.T: ) and Comcast Corp (CMCSA.O: ).

It first began exploring its options last November but put
an initial idea of selling itself on hold, after offers from
such interested buyers as Time Warner Inc (TWX.N: ) — which bid
about $1.5 billion — were considered too low.

Friday’s approved proposal provides for MGM’s secured
lenders to exchange more than $4 billion in outstanding debt
for equity in the company upon its emergence from Chapter 11.

The majority of such senior secured lenders are led by
JPMorgan Chase (JPM.N: ) and Credit Suisse (CSGN.VX: ), according
to Thomson Reuters data.

Bankruptcy experts believe Icahn could next try to
challenge the Spyglass deal in bankruptcy court. Meanwhile, the
legal squabbling between Icahn and Lions Gate continues.

In the suit filed Thursday, the studio said Icahn misled
shareholders by calling its earlier pursuit of MGM a “misguided
strategy” that would end in oblivion.

That suit said Icahn was “secretly plotting to merge the
two studios — but only after he had acquired a sufficiently
large position in both companies at depressed prices to ensure
that he maximized his own profits.”
(Editing by Edwin Chan, Gary Hill)

UPDATE 1-MGM bankruptcy, Spyglass deal wins OK