TVNZ reports that  Prime Minister John Key will be dining with Warner Bros. executives in Los Angeles on his way to Washington, D. C. to meet with President Obama and other officials. Key negotiated with Warner execs last year when a labor dispute threatened to drive the Hobbit production to a different country. Extra tax incentives and a change in labor laws convinced WB to keep the production in New Zealand.

According to Key: “They are very keen to build a long-term relationship with us. They see us as a strategic partner and New Zealand as a quirky but talented little market that’s quite cheap.” The report also says: “Before leaving yesterday, Key told reporters the Government wanted to build a partnership with Warner Brothers ‘like they have with the United Kingdom, where they film the Harry Potter movies’.”

Maybe he’s being overly optimistic, but perhaps The Hobbit will continue to support the Kiwi film industry, a tradition started by The Lord of the Rings. After all, Wellington isn’t all that much further from Los Angeles than London is.

Reuters is circulating a Hollywood Reporter story that provides a little clarification of the deal announced yesterday for Warner Bros. to take over worldwide distribution duties for The Hobbit. Originally the plan had been for MGM to distribute in North America, MGM elsewhere, with the two films chipping in 50% each of the estimated $500 million budget. But it turns out that Warner Bros. is providing the money for MGM to pay for its share of the production costs:

The pact resolves the prickly question of how MGM will pony up its half of the budget, with the other half coming from Warners/New Line.

In recent bankruptcy papers, MGM said it needed a loan of $265 million-$275 million for the two “Hobbit” movies, which are projected to cost at least $500 million to produce.

MGM will still retain international television licensing to the films.

Warner Bros. will collect a distributor’s fee in all territories. I believe this will mean that WB gets a share of the money paid by the theaters before the revenues going to each of the production companies is calculated. Essentially it sounds like MGM will not have to pay the production fees up front but will still be entitled to a share of the eventual income from the film because it initially came into the deal controlling the Hobbit distribution rights.

My guess would be that this arrangement has been planned for some time now but could not be implemented until MGM either got sold or went through bankruptcy. The studio emerged from a short bankruptcy process in mid-December.

Here’s a press release put out by New Line, Warner Bros. and MGM today:

Roger Birnbaum and Gary Barber, MGM Co-Chairman and Chief Executive Officers, Toby Emmerich, President and Chief Operating Officer, New Line Cinema and Alan Horn, President and Chief Operating Officer, Warner Bros. Pictures today announced that MGM and Warner Bros have concluded a deal for Warner Bros. Pictures to handle international theatrical and video distribution responsibilities on MGM’s behalf for Peter Jackson’s highly anticipated adaptation of J.R.R. Tolkien’s “The Hobbit”. This arrangement results in Warner Bros. Pictures handling the bulk of worldwide distribution, while MGM will handle international television licensing for the films. MGM and WB will work collaboratively to coordinate marketing and release plans worldwide.

Jackson, who directed all three “The Lord of the Rings” films, will helm the two films back-to-back, telling the story of “The Hobbit” from screenplays written by Jackson, Fran Walsh, Philippa Boyens and Guillermo del Toro.

The two “Hobbit” films are set to begin production in February 2011, with release dates targeted for December 2012 and December 2013. Jackson will utilize groundbreaking visual effects and his incomparable storytelling to bring Tolkien’s novel to the big screen. Both “Hobbit” movies will be filmed in Digital 3-D, using the latest camera and stereo technology to create a high quality, comfortable viewing experience.

Peter Jackson, Fran Walsh and Carolynne Cunningham are producing the films for New Line, Warner Bros and MGM, with co-writer Philippa Boyens serving as co-producer and Ken Kamins and Zane Weiner as executive producers. The Oscar-winning, critically acclaimed “The Lord of the Rings” trilogy, also from the production team of Jackson, Walsh and Cunningham, grossed nearly $3 billion worldwide at the box office. In 2003, “The Lord of the Rings: The Return of the King” swept the Academy Awards, winning all of the 11 categories in which it was nominated, including Best Picture – the first ever Best Picture win for a fantasy film. The trilogy’s production was also unprecedented at the time.

Variety announced today that MGM has now exited bankruptcy. No new information was released. Given that the bankruptcy package was pre-planned and went through the court procedures smoothly, all the previously announced conditions have been met. The studio can now take its place as co-producer of The Hobbit, as well as handling the non-North American distribution.

Variety reports that today MGM laid off 45 people today in preparation for its emergence from the pre-planned bankruptcy.

Layoffs, which had been anticipated, began Friday at MGM headquarters in Los Angeles and were mostly in distribution and marketing.

MGM disclosed in recent bankruptcy filings that it had planned to cut the staff to about 320 from more than 400 but a spokeswoman indicated Friday that the number of cuts will be significantly smaller.

MGM, which has released only one film this year, received approval on Dec. 2 from a bankruptcy court judge of its “pre-packaged” plan of reorganization. Studio plans to emerge from Chapter 11 as early as next week with $500 million in cash available, once it secures a JP-Morgan Chase loan.

With Spyglass Entertainment toppers Roger Birnbaum and Gary Barber in charge, MGM’s expected to seek a separate loan of $265 million-$275 million for its share of the back-to-back “Hobbit” movies.

Earlier reports had suggested that the Hobbit financing would come out of the $500 million court-approved loan. Now it appears that the MGM will go back to operating in a bigger way by taking out another loan specifically for it. The budget of the two-part film has been announced by the producing studios as around $500 million. The loan seems to confirm that MGM is paying 50% of the production costs.

Variety reports that today Judge Stuart M. Bernstein approved MGM’s bankruptcy plan. The studio should emerge from bankruptcy by mid-December:

“Today’s ruling is an important milestone for MGM,” said Co-Chief Executive Officer Stephen Cooper. “Thanks to the support of our lenders and the hard work of our employees, we have moved through the restructuring process quickly. By dramatically reducing MGM’s debt load and providing MGM with access to new capital, the reorganization plan the Court confirmed today will enable MGM to emerge from this process with a solid financial foundation and will position MGM to be a successful studio going forward.”

MGM noted Thursday that its secured lenders will exchange approximately $5 billion, including accrued interest and fees, for most of the equity in MGM and that Spyglass Entertainment toppers Gary Barber and Roger will serve as Co-Chairman and Chief Executive Officers of MGM Inc.

Bernstein had given MGM approval on Nov. 12 to retain JPMorgan Chase to arrange $500 million in exit financing to fund operations, including production of a new slate of films and TV series. It said Thursday that it expects to have that financing funded by mid-December.

That financing includes MGM’s half of its co-production commitment on The Hobbit, which is already well into pre-production and on schedule to start principal photography in February.

Last week I reported that there were two final requirements that had to be fulfilled before the judge could decide on MGM’s bankruptcy filing. One was a period, ending this past Friday, for objections to the bankruptcy plan to be filed. None were. The second and last was a meeting yesterday where creditors could ask any remaining questions they had for MGM reps. No creditors showed up. According to Variety, “MGM’s hearing has been set for Thursday in Manhattan before Judge Stuart Bernstein and will cover the adequacy of its disclosure statement and solicitation procedures and confirmation of the plan.” There seems to be little chance that he will not accept that plan.

As regular readers already know, that means that Spyglass Entertainment will take over the running of the studio. The $4 billion+ in debt will be turned into equity, and current creditors will assume ownership of MGM.

On the assumption that the plan will be approved, there are already moves to constitute a new board of directors for MGM. Variety reports:

A source familiar with the situation said Tuesday that Ann Mather, former chief financial officer of Pixar Animation Studios, is likely to join the new MGM board of directors. MGM disclosed a week ago in a court filing that its board would include three members who were part of the creditors committee — Patrick H. Daugherty of Highland Capital Management, Christopher Pucillo of Solus Alternative Asset Management and Kevin Ulrich of Anchorage Capital Group.

MGM has also tapped MySpace co-president Jason O. Hirschhorn and former CBS chief financial officer Frederic G. Reynolds as directors along with Barber and Birnbaum.

The judge already approved MGM’s plan to take out $500 million in loans to resume operating as normal. That includes its share of the co-production costs of The Hobbit.

MGM’s filing for a prestructured bankruptcy is still due to be decided on by the judge on December 2. According to Variety, two final meetings need to take place:

The deadline for court filings of any objections to the plan is on Friday, the day after Thanksgiving. And a required meeting of creditors — where they can question MGM reps — has been set to take place in Manhattan on Tuesday, two days before the court hearing.

“Attendance by the creditors at the meeting is welcomed by not required,” MGM said in a court filing. “At the meeting, the credtiors may examine the debtors and transact such other business as may properly come before the meeting.”

As I reported previously, on November 12 the judge approved parts of the plan, including giving permission for the studio to raise $500 million in loans in order to expand its currently minimal operations. That includes at least part of the reported $250 million that MGM will be contributing as co-producer of The Hobbit.

Unless some sort of drama erupts at one of those meetings, a week from now we can expect to see a resolution of MGM’s long-running financial woes.

Variety reports that MGM’s bankruptcy case is moving along smoothly and quickly:

A federal bankruptcy court has cleared several hurdles for confirmation of MGM’s bankruptcy plan on Dec. 2 – including granting permission to the studio to seek a $500 million loan to ramp up operations.

In a Friday hearing in Manhattan, Judge Stuart Bernstein authorized amendments to MGM’s “pre-packaged” plan of reorganization after finding that the modifications were immaterial.

Those modifications excluded the Spyglass Entertainment library from the deal, thus reducing the stake that Spyglass will have in the revamped MGM from 5% to less than 1%. Spyglass toppers Gary Barber and Roger Birnbaum will become the new heads of MGM once it emerges from Chapter 11 protection.

Bernstein also approved a $4 million breakup fee, to be paid to Spyglass if there’s a breach of its agreement with the studio along with MGM’s request to manage its cash in bankruptcy.

“Approval of these motions will help pave the way for MGM to confirm its plan,” the studio said in a statement.

The $500 million loan mentioned in the first paragraph includes part of MGM’s co-financing of The Hobbit. The court had already approved MGM’s using $40 million of cash-on-hand to start its payment on the estimated $500 million budget of the two-part film. MGM is contracted to pay half of the film’s production costs and will distribute the film outside the North American market.

The approval of the “breakup fee” of $4 million to be paid to Spyglass in case the current bankruptcy case is not successful does not mean that the Spyglass deal is off. It only means that in the unlikely event that the Spyglass deal fell through at this late date, MGM could use its cash to pay that fee.

So the co-financing of The Hobbit moves one significant step closer to happening. All this has happened only nine days after the bankruptcy case was filed, suggesting that the goal to resolve the case by December 2 should be met. In the meantime, Warner Bros. is footing the bill for the pre-production on The Hobbit.

Gary Barber says that he and Roger Birnbaum will take over the running of MGM in about a month:

Gary Barber and Roger Birnbaum will be running MGM within three or four days after a federal court approves the Lion’s reorganization plan on Dec. 2, Barber said Friday.

But that’s all Barber would reveal about his new gig when appearing at AFM’s annual finance conference on Friday in Santa Monica. Even before Barber took the stage, moderator P. John Burke of Akin Gump Strauss Hauer & Feld sternly instructed that Barber wasn’t able to discuss MGM.

MGM’s bankruptcy filing, now awaiting a judge’s decision, involves a prestructured plan. The details have already been worked out, so once the studio receives approval on December 2, there’s no reason why the plan could not be implemented immediately. The studio’s request to retain money enough during the hearing to finance its current operations means that $40 million will be available to help co-produce The Hobbit. The remainder of MGM’s half-share in the production will be provided via a loan once the studio emerges from the bankruptcy process.

The quotation comes from a Variety article posted today.