Metro-Goldwyn-Mayer's steering committee met with creditors on Thursday to present a stand-alone plan for the studio, as Access Industries threatened to drop its bid unless it gets a response soon, sources familiar with the matter said.
Creditors presented a plan that abandons the idea of a sale of the entire studio and involves a mandate for MGM to make six to eight movies a year and requires large amounts of capital, after the studio was disappointed with bids it got in a second-round of bidding last week, said the sources, who requested anonymity because they were not authorized to speak on the record about the negotiations.
MGM and Access declined comment.
The stand-alone plan being floated on Thursday involves debt-ridden MGM filing for a pre-arranged bankruptcy and would require approval from a majority of the creditors.
One of the sources said the steering committee and creditors were discussing potential sources for cash infusions and new management possibilities under the stand-alone scenario on Thursday.
The storied studio, whose roster of stars included Greta Garbo, Joan Crawford, Clark Gable and Jean Harlow, enlisted turnaround specialist Stephen Cooper last year as vice chairman and a member of its office of the chief executive to help it restructure.
Billionaire industrialist Len Blavatnik's Access Industries was one of three parties to put in bids last week, but another of the sources familiar with Access said the company was still waiting for MGM to respond to its bid and indicated it may drop out of the bidding if it does not get clarity soon.
Lions Gate Entertainment, another bidder, has already withdrawn from the auction, while Time Warner Inc put in the highest bid of $1.5 billion in cash.
Access Industries' offer involves an equity infusion and help with restructuring the company's $3.7 billion of debt, sources have said.
The source familiar with Access said Access has not had any discussions with the creditors concerning its bid nor any discussions with MGM or advisors regarding its providing financing to MGM as part of the restructuring plan and it will not wait much longer.
MGM, home to more than 4,000 film titles, said in November it was exploring a potential sale of the company, but as the auction progressed, buyer interest in the company dwindled.
Despite a film library that includes the James Bond and Pink Panther franchises, MGM has been struggling to create new hits. It is also trying to cope with plunging DVD sales as consumers move to viewing online.
The credit crisis has not helped, either.
A buyout in 2005 by a group including four private equity firms, Providence Equity Partners, TPG, Quadrangle Group and DLJ Merchant Banking Partners, and media companies Sony Corp and Comcast Corp, also saddled the company with debt.