Relativity is reportedly trying to buy a major portion of MGM from its investors, including Highland Capital, the Carlyle Group and Sequoia Group and using that stake to force MGM into bankruptcy. Relativity would then streamline MGM’s overhead and use the studio’s distribution networks to release its films.
We find this story incredibly hard to believe considering that Relativity just yanked some of its movies back from MGM, after reportedly believing that the studio wasn’t in sound enough financial condition to release them.
If Ryan Kavanaugh thought MGM was in such dire straits, why do business with the company now? Relativity also just inked a distribution deal with Lionsgate and is releasing the movies it co-finances through Sony and Universal. What would be left for the studio to release through MGM? Its Rogue titles, which are currently being distributed by Universal? Is MGM’s distribution network better than Universal’s? We doubt it.
Also, Relativity just bought Rogue from Universal for $150 million and is still co-financing films for Sony and Universal. Although Ryan Kavanaugh says he and his financial partner hedge fund Elliott Associates are doing well despite the credit crunch, would they have the money or be willing to spend it to buy a big chunk of MGM?
We’ve reached out to Ryan Kavanaugh’s PR rep, and we’ll update this story as we get more information.
MGM is currently trying to restructure its $3.7 billion in debt after the studio’s owners (Sony, Comcast, TPG Capital and Providence Equity Partners) grew concerned that the company’s free cash flow of $500 million a year wouldn’t be enough for it to repay its creditors by next April. Along with investment banks Moelis and Co. and Houlihan Lokey, MGM is exploring a number of options to get on more solid financial footing.
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