MGM Keeps Its Precious Hobbit

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Before we get into “The Hobbit” films, here is the official statement by MGM released today after worries a week ago that the studio could be facing bankruptcy:

MGM is pleased to announce that the Company has entered into a forbearance agreement with its lender group. The Company is appreciative of its lenders’ ongoing support. Under the terms of the agreement, MGM’s lender group has agreed not to enforce its rights or remedies arising as a result of the Company’s request to not currently pay interest due on September 30, October 31, and November 30, 2009.

This agreement, which expires December 15, 2009, provides MGM with additional liquidity as discussions continue regarding the development of an optimal capital structure in support of the Company’s long-term business plan. With the agreement in place, MGM has taken an important first step in ensuring that the Company has enhanced financial stability and adequate liquidity to implement its business strategies.

The Hollywood Reporter adds that this gives MGM enough cash to proceed with its participation in The Hobbit and its sequel:

Concern over MGM’s hold on “Hobbit” is at the heart of the activity. In a 50-50 rights partnership with Warner Bros.’ New Line unit, two “Hobbit” pics are being developed.

The first “Hobbit” aims for theatrical release in 2011, with Guillermo del Toro on board to direct that and a sequel. Peter Jackson, Fran Walsh, Philippa Boyens and del Toro are writing scripts for both and are expected to deliver the first screenplay by the end of November.

Warners will lead production and distribute at least domestically. For now, the Burbank studio also is covering any immediate expenses.

The article, which you can read in full here, adds that the studio has enough cash flow to stay in business for at least another year. The article does say, however, that management and the lenders realize the studio’s various rights on major properties such as “Hobbit,” “The Pink Panther” and the lucrative James Bond franchise are key to MGM maintaining a decent market value.

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