Credit Lion

MGM once symbolized Hollywood itself. The powerful studio was once known for turning out classic movies, then they kind of lost touch with the audience just after 2001: A Space Odyssey and after that they bounced back with such huge eighties hits as Blame It On Rio, Teachers, Roadhouse, and through partner United Artists, Heaven's Gate.

Also about a decade ago they even had to sell off their historic lot to Sony, who wasn't exactly setting the world on fire at the time.

Anyway, nowadays they're sensibly forgetting about movies and putting all their energy into restructuring debt.

Details of a restructuring proposal are being formulated by MGM and its advisers. But a series of conference calls between Lion execs and studio creditors have made it plain that the MGM owners' hold on the studio is crumbling.

A recent audit confirmed the Lion is in no imminent danger of insolvency. But cash flow is so tight that MGM execs recently met with liquidity consultants to discuss strategies for navigating relations with the studio's many vendors.

Creditor-side sources say the Lion's consortium of owners -- including investment firms Providence and TPG as well as Comcast and Sony -- will do well to come out of the restructuring with even a 10% stake in the studio.

A restructuring would make roughly 150 MGM creditors majority owners of the studio by converting about $2.5 billion in Lion debt into equity.

MGM chief exec Steve Cooper -- a turnaround specialist brought in by current owners -- recently acknowledged in a conference call with the creditors group, "All right, guys, the debt owns the equity."

That could be strategic posturing, but for now, MGM creditors are giving the studio's new CEO high marks for his forthright style.

"He's brought a refreshing level of candor to the process," one call participant said.

I've been to the new MGM studios in Santa Monica, and it's telling that there are no offices more than three stories up. Could you imagine the liability costs? Should I throw the word "suicide" in here somewhere or does the gag just explain itself?