Billionaire Carl Icahn on Wednesday persisted in his crusade to block a pending deal between Metro-Goldwyn-Mayer Inc and Spyglass Entertainment saying he had raised his stake in the studio by purchasing a "substantial" amount of debt.
Icahn, who backs a rival proposal to merge MGM with Lions Gate Entertainment Corp said on Wednesday that he had bought senior secured loans for 50 cents per one dollar in principal amount.
These purchases are in addition to his recently announced tender and put offers for the loans. Prior to these efforts, Icahn was reported to have a debt position in MGM worth an estimated $500 million.
MGM declined to comment on Icahn's latest action or his stake.
Unlike the previous offers, the purchases disclosed on Wednesday were not conditional on any minimum amount purchases, but did require sellers to be holders of record and to vote against the Spyglass plan. The voting deadline is this Friday.
On Tuesday Icahn offered to buy $1.6 billion in MGM secured loans at 53 cents per dollar principal amount and last week offered to buy up to $963 million in MGM senior debt from creditors on the condition that they vote down the Spyglass proposal.
MGM, which has struggled with heavy debt after a leveraged buyout in 2005, on Monday sent a memo to creditors dismissing Lions Gate's claims of synergies and cost savings outlined in its merger proposal, a source familiar with the matter told Reuters. .
The studio favors a plan that calls for Spyglass chiefs Gary Barber and Roger Birnbaum to take over a slimmed down MGM after a prepackaged bankruptcy, the source said on condition of anonymity because the memo had not been made public. A prepackaged bankruptcy is a faster method of reorganizing than a typical bankruptcy filing.
Sources have said a group of hedge funds including Anchorage Advisors and Highland Capital, which control $800 million of MGM debt, are supporting the Spyglass deal.
These funds think the Lions Gate deal lacks clarity, would take longer than the Spyglass deal and could derail a long-sought production deal with Time Warner Inc to produce two films based on "The Hobbit," the sources said.
Highland declined comment, and Anchorage was not immediately available to comment.
Icahn, who owns more than 30 percent of Lions Gate, also has a tender offer out to buy that studio's outstanding shares for $7.50 a piece. (Reporting by Susan Zeidler)
© 2022 Thomson/Reuters. All rights reserved.