Spyglass co-toppers Gary Barber and Roger Birnbaum have signed a non-binding letter of intent with MGM to take the executive reins of the studio after the Lion completes bankruptcy reorganization.

Details of the pact weren’t immediately available. But a studio insider said the duo would serve as co-chairmen and co-CEOs of MGM once their deal is completed. It wasn’t immediately clear if the studio would owe Spyglass a breakup fee if the parties fail to close on the deal.

More than 100 Lion lenders must approve any prepackaged reorganization plan, but no date yet has been set for the vote. Barber and Birnbaum signed their letter of intent last week.

Again, we’re less than a week out from MGM’s next (and supposedly last) debt-payment deadline arrives. That may create the incentive for the lenders to vote soon. As I understand all the coverage, a plan for MGM’s structured bankruptcy has already been devised, so if there’s agreement, there could be a speed-up in the progress of this series of events.

[Thanks to Paulo Pereira for the link!]

He is also confident that there should soon be certainty about whether he would direct The Hobbit movie, which would allow him to map out a five-year plan for projects “that will keep many people very busy”.

[...]

A decision was still to be made on whether he would direct The Hobbit, which is in limbo while problems are resolved with Warner Bros and MGM, which is heavily in debt and up for sale.

But he said yesterday that Warner Bros was “making progress untangling the MGM situation, so we should have certainty with The Hobbit sometime soon”.

There’s not really any news here, and “sometime soon” isn’t very specific. Still, it’s good to hear from Peter, however, briefly.

A proposal to put Spyglass toppers’ Gary Barber and Roger Birnbaum in charge of MGM pushed ahead Wednesday as their plan for restoring the Lion’s roar was presented to all of the studio’s debtors during a conference call.

Barber and Birnbaum have been holding discussions with MGM’s leading creditors, which include Anchorage Advisors and Highland Capital. Wednesday’s conference call looped in more than 100 creditors, who must endorse the plan.

Those knowledgeable with the talks say Birnbaum and Barber would take over after MGM goes through a pre-packaged bankruptcy. The creditors would absolve much of the studio’s $4 billion in debt and take a majority equity stake in the company, along with providing a certain amount of working capital.

A major component of the plan would likely include shuttering MGM’s distribution operation, which would reduce overhead substantially. Instead, Birnbaum and Barber would strike a theatrical distribution deal with another major.

A leading candidate is Paramount, with whom the duo have formed a close relationship, partnering on the rebooted “Star Trek” franchise, “G.I. Joe: Rise of the Cobra” and “Dinner for Schmucks,” according to insiders.(Daily Variety, Aug. 13).

MGM also would move aggressively into television.

The proposal under which Spyglass Entertainment’s Gary Barber and Roger Birnbaum would take the reins of troubled MGM is sparking talk in Hollywood that the Lion would likely shutter its domestic theatrical distribution operation if the Spyglass deal comes to pass.

Majors that are a natural fit to handle theatrical distribution for a pared-down MGM include Paramount and Sony, although 20th Century Fox already handles worldwide home entertainment distribution for MGM as well as international theatrical distribution.

For MGM creditors, the appeal of a Barber-Birnbaum team is the duo’s track record of working closely for more than a decade with most of the majors, co-financing and co-producing an array of titles. Spyglass also has produced its own films.

Barber and Birnbaum could continue in the same vein at MGM. Among MGM’s more lucrative film franchises, Warner Bros. already has domestic distrib rights to “The Hobbit,” while Sony distributed the past two James Bond pics for MGM — though it’s possible another studio could become the new Bond distrib for the Lion.

Insiders say one blueprint under discussion is for the newly configured MGM to make four to six films a year. With that volume, it wouldn’t make sense to maintain a theatrical distribution operation or a full-fledged marketing division.

Shutting down MGM’s distribution operation and dramatically trimming the Lion’s marketing unit would save millions in overhead, a plus for creditors looking to resolve the company’s $4 billion debt load.

Barber and Birnbaum launched Spyglass in 1998 after inking a five-year distribution deal with Disney. After the Mouse House relationship ended, Spyglass began working with most of the majors.

In recent years, Spyglass has become particularly close with Par, co-financing and co-producing J.J. Abrams’ “Star Trek,” as well as “G.I. Joe: The Rise of Cobra.”

Unlike other majors, Paramount would appear to have the capacity to accommodate four to six titles a year. Par has adopted a lean-and-mean approach of releasing fewer of its own movies and relying on slate distribution deals, such as those with Marvel Entertainment and DreamWorks Animation. Its DWA pact is up in 2012.

MGM and Sony have a close relationship after working together on Bond pics, which Sony distributed. Spyglass has also teamed with Sony several times, as well as with Universal, with which it worked on this summer’s comedy “Get Him to the Greek.”

In addition, Spyglass is no stranger on the Fox lot, having teamed on films including “27 Dresses.”

One wild card is MGM’s home-vid deal with Fox, which is up next year. That could become a negotiating point for any domestic theatrical distrib deal MGM strikes with another studio. Ditto for Fox’s international theatrical distribution pact with MGM.

Because of all the creditors involved, knowledgeable sources stressed that the Spyglass/MGM negotiations could still fall apart.

After several weeks of haggling over deal terms, Spyglass Entertainment is in the final stages of hammering out an agreement to take over the management of debt-ridden Metro-Goldwyn-Mayer, according to people familiar with the situation.

One sticking point had been the breakup fee that Spyglass would be paid should MGM decide to back out of the arrangement, said one person with knowledge of the negotiations.

[...]

In a plan Spyglass presented earlier this summer to MGM’s steering committee of leading creditors — including Anchorage Advisors, Highland Capital Management and Davidson Kempner Capital Management — Barber and Birnbaum would run a scaled-back version of the studio as co-chief executives as part of a long-planned pre-packaged bankruptcy. Under a restructuring plan, MGM creditors would swap their debt for equity.

Spyglass, whose main financial backer is Cerberus Capital Management, would remain a separate company, continuing to produce its own slate of movies. The company recently co-financed the Steve Carell comedy “Dinner for Schmucks” with Paramount Pictures and DreamWorks, and last year’s “Star Trek” remake and ” G.I. Joe” with Paramount.

Part of the Spyglass library, about 15 titles personally owned by Barber and Birnbaum that include such films as “The Sixth Sense” and “Seabiscuit,” would be folded into MGM’s own catalog of 4,000 movies.

It is unclear how much money Spyglass would need to make new movies at MGM and where the money would come from. Barber and Birnbaum have told MGM that they plan to slash overhead costs (about 450 people are still working at the studio) and produce a handful of movies each year, including James Bond sequels and two planned films with Warner Bros.’ New Line Cinema unit that are based on J.R.R. Tolkien’s ” The Hobbit.”

The fact that the plan was submitted “earlier this summer” and negotiations are in the “final stages” sounds promising.  As the story points out, however, this isn’t a done deal yet, and something could cause it to fall apart. I should add that Spyglass is a well-established, successful production company and could probably held MGM get out of its current situation.

Spyglass Entertainment is nearing a deal to run MGM after the studio restructures approximately $4 billion in debt later this summer.  This is a coup for Spyglass heads Gary Barber and Roger Birnbaum who have beaten rivals from Lionsgate and Summit Entertainment to merge or acquire the studio.  Warner Bros. was considered the only other serious bidder, but their offer for the venerable lion was considerably less than what MGM’s debt holders were looking for.

The report indicates Barber and Birnbaum would run MGM as co-chief executives and that Spyglass would merge parts of its film library with MGM’s.  The duo would also receive 4% of the new company that would be valued, in MGM’s view, at around $1.9 billion.  Most importantly, creditors would forgive all of MGM’s massive debt.

The story goes on to speculate about possible reorganization of the film wing of MGM. It goes on to say: “As for moviegoers, this likely means Spyglass will quickly move forward with working out the co-financing on Peter Jackson’s “The Hobbit” and that a new James Bond film will be in production as early as next year.  It’s worth noting the 50th Anniversary of the first James Bond film, “Dr. No,” is in 2012.”

For those curious about what Spyglass Entertainment is, take a look at their list of production here. Older films include The Sixth Sense, and the company is responsible for the current Get Him to the Greek and Dinner for Schmucks.

Thanks once again to Paulo Pereira, who’s obviously right on top of things, for alerting me to these stories!

[Added later on August 10: Oddly enough, today The Hollywood Reporter posted a story about how dire the MGM situation is and how the studio is headed for bankruptcy. As far as I can see, it's basically a summary of what we already knew, with no mention of the WSJ news.]

The genre auteur says he has no regrets about departing the New Zealand production, but says that anyone who think that MGM’s financial mess was the main culprit for his departure is oversimplifying the issue.

“People kept misconstruing that it was MGM. It came from many factors,” Del Toro told 24 Frames in an interview at Comic-Con. “It wasn’t just MGM. These are very complicated movies, economically and politically. You have to get the blessing from three studios.”

Instead, he said, it was the cumulative effect of all of these problems that began to wear him down. “It was really the fact that every six months we thought we were beginning, and every six months we got pushed [back]. And before you could blink, it was a year, and then it was two years.”

So was there was a last straw in this bundle of woes? Some insiders have said that Del Toro and Jackson clashed over creative-control issues. The director said that in all their time working on the movie, he and the “Lord of the Rings” filmmaker were nothing but copacetic, though Del Toro didn’t entirely rule out that it one day could have become fraught. “We were at the stage where the collaboration was good. If there were going to be any issues, we never got to that stage [in development],” he said.

As far as I can tell, the main named person who said that MGM was holding up the greenlight on The Hobbit was Guillermo himself, who made a statement that seemed to imply such a thing on TheOneRing.net. That followed shortly upon an unnamed “absolutely reliable source” who told TORN that MGM was indeed the main factor behind the delay.

Well, not to say “I told you so,” but although I’ve been covering the MGM developments, I’ve also been opining that I didn’t think the studio’s financial mess could be the main factor in the delay. Warner Bros. would not walk into a deal with a studio known to be tottering on the brink of bankruptcy without multiple contingency plans. Still, it sounds like there is some sort of tangle among New Line, Warner, and MGM, “economically and politically.” I hope someday we find out what the real cause was.

It’s an excellent article, but let me make a few small corrections and clarifications.

First, Campbell writes that MGM’s current choice is “to sell out to Time Warner who made the highest bid in an auction in March, or soldier on and try to run the studio themselves with re-financing and hired help …” As I understand it, the recent Lionsgate meeting with MGM was to put forward a proposal for a merger. That’s how the Los Angeles Times reported it. If that were to go through, Lionsgate would not be “hired help” but a partner within the same overall company.

Second, Campbell says that MGM’s assets include “the next James Bond film.” Actually MGM owns the Bond franchise, which is considerably more valuable.

Third, he points out that the Wall Street Journal sees Spyglass as the leading contender to take over the running of a restructured MGM. That may well be the case. The Lionsgate meeting, however, involved what I believe was the first formal proposal put forward since the bidding process was closed months ago. That might seem to make Lionsgate the leading contender du jour. Yet, as Campbell points out, the merger would require the approval of Lionsgate’s main shareholder, Carl Icahn, who seems dead set against the idea. So it’s definitely complicated.

Fourth, Campbell also points up the tangle of players who have or have had some share in the Hobbit rights. This is basically accurate, but it might give the impression that Saul Zaentz and Harvey Weinstein would have the same sorts of rights as other parties like Warner Bros. and MGM. There’s a notable difference. What Saul Zaentz bought back in 1976 was the production and distribution rights to The Lord of the Rings and the production rights to The Hobbit. Had he but paid that extra fee and bought the Hobbit distribution rights as well, we would not be in this current situation. What he then sold Harvey Weinstein (i.e., the Miramax company) in 1997 was the same thing: LOTR production and distribution, Hobbit production. MGM retained the Hobbit distribution rights and does to this day. [July 16: Clarification. As Voronwë the Faithful has pointed out to me over on the TORN Message Boards, what Zaentz sold Miramax and Miramax then sold New Line was a limited-term control over those rights, subject to various conditions. Zaentz is still the underlying owner of the rights. As I said, it's complicated.]

So Saul Zaentz and Harvey Weinstein will be owed some money, though less than the other players. Disney might well get some as well, since Disney owned Miramax at the time when Zaentz sold it the various rights described above. (Still does, though the company may change hands any moment.) Michael Eisner unwisely shared the 5% of gross minus costs that New Line had to pay to get the rights from Miramax: Disney got 2.5%, the Weinstein brothers 2.5%. I suspect that’s how the deal will work this time, too, but maybe not.

Finally, it’s Lionsgate, not Lion’s Gate.

Campbell gives some interesting speculations on how The Hobbit would fit into Peter’s career if he chooses to direct it. Whether or not he turns out to be right, it’s interesting to get a Kiwi perspective on the situation.