NEW YORK - Payments on credit default swaps protecting the loans of Metro-Goldwyn-Mayer will need to be made after the Hollywood studio failed to make a payment due on its loan on Sept. 30, the International Swaps and Derivatives Association said on Monday.
Privately owned Metro-Goldwyn-Mayer, home to a renowned film library including the James Bond movies, said this month it had secured a forbearance agreement with its lenders.
The agreement, which expires Dec. 15, exempts it from interest payments of an undisclosed amount as it continues discussion with lenders to develop a new capital structure and support a long-term business plan.
The failure to pay interest, nonetheless, will trigger payments on the company's default swaps, ISDA said. CDSs are used to protect against a borrower failing to make payments on debt, or to speculate on their credit quality.
ISDA will hold an auction to settle CDSs on MGM's loans, the trade group said.
MGM was taken private in $2.85 billion buyout in 2005 by a group including private equity firms Providence Equity Partners, TPG, DLJ Merchant Banking Partners, a unit of Credit Suisse, and Quadrangle Group, in addition to media companies Sony Corp and Comcast Corp. (Reporting by Karen Brettell; Editing by James Dalgleish)