Nikke Finke, a prominent entertainment reporter with her own website, has posted information concerning a Wednesday meeting between MGM and its bondholders. According to Finke’s sources, MGM cannot pay the interest on its debt and has asked the lenders to hold off on payments until February. If they refuse, MGM will most likely have to declare bankruptcy.

Finke presents a lot of facts and figures on this, but here’s the portion relevant to The Hobbit: “MGM said it needed $20M in short-term cash flow to cover overhead, and an additional $150 million to get through the end of year and continue funding its projects, and to start Peter Jackson’s Hobbit.”

Finke’s title includes the phrase, “Both ‘Hobbit’ and James Bond in Peril.” Just the sort of sensationalistic reporting fans don’t need. Yes, those two franchises are in peril as far as MGM is concerned. If it goes into bankruptcy and has to sell its most valuable assets, MGM probably wouldn’t be able to go on making films much longer. Its other series (e.g., Robocop) aren’t nearly as lucrative.

But that doesn’t mean that the production of The Hobbit is likely to be interrupted, let alone terminated. We don’t know what portion of the filming budget MGM is supposed to put up. It may be considerably less than Warner Bros.’s share. There is almost certainly a clause in the agreement between WB and MGM that dictates what would happen in the event of MGM being unable to pay its portion. It might be obligated to sell the distribution rights to The Hobbit to Warner Bros. Warner might even try to buy the ailing studio at a bargain price. I’ve got to believe that WB has covered all contingencies in relation to such a valuable property. It’s quite possible that WB executives would be quite happy to have MGM out of the way.

So far the lenders have not made their decision. They might accede to MGM’s request and suspend interest payments. A struggling studio is more valuable to them than a bankrupt one, and bankruptcy proceedings would delay any payments anyway.

We should also remember that no official announcements have been made. Finke’s story still has something of the status of rumor. Given her track record as a reporter and her many contacts in the film industry, however, it’s likely to be pretty accurate. Still, we should wait until more information comes out. And again, it’s MGM that has to worry about losing The Hobbit, not us.

My own guess would be that, if it came to a decision as to whether to sell off The Hobbit distribution rights or the James Bond series, MGM would sacrifice its Hobbit interests to save Bond. The Bond series has been running since the early 1960s and shows no signs of losing its public. Many feel that without the Bond franchise, MGM wouldn’t have much hope of surviving.

[Thanks to David Platt for alerting me to the Finke story.]