MGM/UA Has a New Proposal to Restructure : Seeks More Capital, Will Make Films Only at MGM

MGM/UA controlling stockholder Kirk Kerkorian on Tuesday unveiled another restructuring plan for the movie firm, saying it plans to raise $200 million in new capital from present shareholders and possibly sell certain unspecified assets.

MGM/UA also disclosed that it will make all of its future movies through its MGM production unit. Up to now, the company has used two production arms, MGM and United Artists.

The new plan is a successor to one that fell through in late July. That deal involved a proposed sale of a 25% interest in MGM to financier Burt Sugarman and producers Peter Guber and Jon Peters. Layoffs and cutbacks followed the collapse of that deal.

The company said it expects that the new plan will allow it to repay all its bank debt and to increase its annual cash flow by more than $50 million.

The announcement led to increased speculation that the UA subsidiary might be earmarked for sale, but MGM/UA Chairman Stephen Silbert denied that the sale of either the MGM or the UA unit is under consideration. He declined to say whether the company is negotiating the sale of any assets.

Among MGM/UA’s assets are its television production unit and a new building under construction in Beverly Hills. It also owns the valuable UA library with its James Bond, Pink Panther and Rocky movies.

Analyst John Olds of Paul Kagan Associates in Carmel, Calif., was among those who said they were struck by the timing of the announcement, just a day after Anthony Thomopoulos disclosed his resignation as UA chairman.

Reports ‘All Hearsay’

Thomopoulos, asked Tuesday about published rumors that he himself was trying to arrange financing to buy UA, said it was “premature to talk about it,” adding that the reports were “all hearsay.”

In his resignation announcement, Thomopoulos said he was staying on at MGM/UA as a consultant until his employment contract runs out in late November.

To raise $200 million more equity, the company proposed to offer stockholders the right to buy additional shares in the company. The price would be set at the time of the offering, which Silbert said might be made in about a month.

Kerkorian’s private investment firm, Tracinda Corp., which owns 79% of MGM/UA’s stock, will buy any shares not purchased by other (public) shareholders, the announcement said.

Tracinda would have a right to buy 79% of the offering, with the rest available on a prorated basis to public shareholders. Silbert said it had not been determined whether the stockholder rights will be transferable.

Regarding the decision not to use two separate movie production units, Silbert emphasized the cost savings that will result, saying:

“When the (presently constituted MGM/UA) was started just over two years ago, we needed to re-establish MGM/UA as a major presence in the industry. Two separate production units allowed us to achieve maximum output on an accelerated basis. Now that our (movie) release schedule has been set, the focus of our energies within a single unit will allow us to significantly reduce our costs and operate on a more efficient basis going forward.”

Thomopoulos said UA has fewer than 30 employees and that several films being prepared for release are in the post-production phase. Only one, the 16th James Bond picture, “License Revoked,” is still in production.

Dennis Forst, vice president and senior analyst at Security Pacific Merchant Bank in Los Angeles, commented Tuesday that MGM/UA “shouldn’t have had two (production) units in the first place,” because of the expense.

Forst said the announcement was “kind of vague,” and Olds of the Paul Kagan organization said it “puzzles us somewhat” and added: “It is difficult to tell just what he’s trying to do except to raise more money.”