MGM takes reorganization efforts to handle its $4 billion debt

The next chapter for Hollywood's venerable film studio Metro-Goldwyn-Mayer: Chapter 11, if the company has its way.

After months of negotiations over roughly $4 billion in its debt, MGM said Thursday that it had begun soliciting votes from secured lenders in support of a prepackaged reorganization under Chapter 11 bankruptcy, New York Times reports.

The plan, which still has to be approved by nearly 100 creditors, calls for the faded Hollywood studio to be shrunk into a production company releasing about half a dozen pictures annually and run by Spyglass co-chiefs Gary Barber and Roger Birnbaum.

The reorganized MGM would be valued at $1.9 billion, according to a person close to the situation, about $3 billion less than the price paid when it was bought in 2004, reflecting the declining value of movie libraries as DVD sales have collapsed.

MGM's creditors have until Oct. 22 to vote on the plan, which would see their debt swapped for 95% of the studio's equity after a pre-packaged Chapter 11 bankruptcy. People familiar with the matter expect the plan, which is already supported by the company's largest creditors, to be approved.

A bankruptcy filing would be made immediately after a vote, and the court process is expected to last about 30 days, Los Angeles Times says.