Metro-Goldwyn-Mayer confirms ‘potential sale’ of company as lenders extend deadline

Struggling studio MGM says it’s looking for buyer

LOS ANGELES — Struggling movie studio Metro-Goldwyn-Mayer Inc. is looking for a buyer.

The home of the James Bond and Pink Panther franchises said Friday it has begun to explore strategic options including “a potential sale of the company.”

In a statement, MGM also said its lenders have agreed to grant the company another respite until Jan. 31 from interest payments on nearly $4 billion in debt.

The decision, reversing its refusal to sell a year ago, came during a conference call Friday between restructuring expert Stephen Cooper, now MGM’s vice chairman, and the 140 lenders owed some $3.7 billion in bonds maturing in mid-2012, according to a person close to the situation.

The person was not authorized to speak publicly and spoke on condition of anonymity.

The lenders agreed to seek outside investors for a new partnership, investment or sale of part or all of the company. Its most valuable asset is its library of 4,000 movie and TV-show titles including such as “Rocky” and “Dances With Wolves.” It also owns subsidiary United Artists, headed by Tom Cruise, whose film “Valkyrie” grossed a respectable $200 million worldwide after its release last year.

But the company has fallen on hard times and the home video market has shrunk.

MGM’s latest release, a remake of the 1980 musical “Fame,” was panned by critics and quickly vanished from most theaters after its Sept. 25 release, making $42 million worldwide to date.

Financial adviser Moelis & Co. is expected to send out non-disclosure agreements and detailed financial information to interested parties by early next week, the person said.

Potential buyers include Time Warner Inc., the parent of the Warner Bros. studio, and News Corp., home of 20th Century Fox.

On Thursday, with rumors swirling of its potential sale, Lions Gate Entertainment Corp. Vice Chairman Michael Burns also said his company was interested in taking a look.

“They have fantastic franchises like James Bond, they have half of ‘The Hobbit.’ Of course it’s interesting to us,” Burns told CNBC’s Fast Money.

Although MGM had the cash on hand to make the interest payments, pushing back the interest payments allows it to complete three movies it has in the pipeline for next year: “Hot Tub Time Machine,” ”Red Dawn,” and “The Zookeeper,” the person said.

MGM was taken private for nearly $5 billion in 2005 by a group led by Providence Equity Partners, Texas Pacific Group, Sony Corp. and Comcast Corp., DLJ Merchant Banking Partners and Quadrangle Group.

In 2007, MGM made $558 million alone from its library of titles, but since then DVD sales have declined industrywide, and a large chunk of those sales has likely vanished.

Besides the bonds, has a $250 million revolving credit facility with JPMorgan due in April.

Cooper, a restructuring guru and former chief executive officer of ailing businesses from Krispy Kreme Doughnuts Inc. to Enron Corp., joined MGM as a member of an “Office of the CEO,” replacing Chief Executive Harry Sloan in August.

(This version CORRECTS Corrects gross of film ‘Fame’ in graf 8. UPDATES with details of decision-making process, background on MGM. ADDS byline. Moving on financial and entertainment services.)