Dorothy & Scarecrow Are Off To See The Wizard
If only the folks at Metro-Goldwyn-Mayer studios had a wizard to visit, who, at the click-of-the-heels three times, could make all of their financial dreams come true. And their nightmares go away.
Instead, the studio known for James Bond movies and the above “Wizard of Oz,” is bringing on board a restructuring expert to help it rework a mound of debt it took on from a $5 billion leveraged buyout in 2004.
The Wall Street Journal’s Peter Lattman reports that a bunch of equity investors in the original LBO have been essentially wiped out. Providence Equity Partners has marked the investment at about 10 cents on the dollar. When the deal was originally announced, Providence said it was committing $525 million. That would be worth but $52.5 million today.
Other big investors, according to the press release in September 2004: Texas Pacific Group ($350 million), Sony Corp. ($300 million), Comcast ($300 million) and DLJ Merchant Banking ($125 million).
But it’s not just equity holders who stand to suffer. When the deal was announced, J.P. Morgan Chase and Credit Suisse committed to lead a syndicate that would provide $4.25 billion senior debt financing. And that paper has gotten clobbered.
These term-loans, which carry a coupon of 3.569% and mature in April 2012, were quoted today around 57 cents on the dollar. That amounts to a yield of almost 29%.
Past news items have indicated there are more than 100 lenders/creditors. And they aren’t all banks – some will be individual investors through various funds that invested in some of this senior bank paper as a way to let the little guy play alongside the big guy in the LBO game.
A search of filings with the Securities and Exchange Commission shows these funds have been marking down the MGM term-loans for a while. Some of those funds include: Van Kampen Merit Dynamic Credit Opportunity Fund, Blackrock Senior Floating-Rate Fund, Lord Abbett Investment Trust, ING Prime Rate Trust and the ING Senior Income Fund.
