Privately-held, debt-laden MGM announced some major management changes. CEO Harry Sloan is out, having taken the job soon after the studio was brought private in 2005 for $2.85 billion by Sony and Comcast along with private equity firms Texas Pacific Group , DLJ Merchant Banking Partners, Quadrangle Group and a unit of Credit Suisse.
Now Sloan is stepping aside from the CEO job. Sloan will remain non-executive chairman and now three executives will be "members of the office of the CEO": Mary Parent, chair of the worldwide motion picture group, Bedi Singh, CFO and president of finance, and turnaround expert Stephen Cooper, who faces the task of getting the company's balance sheet on track.
MGM sits at the center of a number of challenges plaguing the movie industry. Film financing is harder to come by and credit markets are tight. (See how long it took the most bankable producer and director in Hollywood to raise $325 million from Wall Street).
Another factor putting pressure on the company is the decline in DVD sales. MGM's greatest asset is, without a doubt, its impressive library — 4,000 films and over 10,400 episodes of TV programming. But revenues from licensing and DVD sales are surely suffering a steady decline. The box office may be thriving so far this year, but that doesn't help MGM one iota.
In April 2010, MGM faces a $250 million payment on its line of revolving credit, with $3.7 billion in term debt due June 2012. The studio has been looking to restructure its debt load and figure out its cash flow. The studio's last release was last Christmas — Tom Cruise's "Valkyrie" — and its next release is its remake of "Fame," scheduled to hit theaters Sept 25.
This isn't the first time since MGM was taken private that it's tried to get its house in order. In May, MGM announced it hired Moelis & Co. investment bank to help refinance its debt and started talking to its 140-member steering committee as part of the process.
Bringing in Cooper shows that MGM pulling out all the stops to restructure the company's debt and optimize its balance sheet. Cooper oversaw Enron's bankruptcy and was brought in to stabilize Krispy Kreme operations, restructuring the company as CEO.
He's got his work cut out for him at MGM, as the entertainment landscape continues to shift under his feet. This ousting is reportedly not because of any pressing debt issues: the company says it's in full compliance with its debt covenants. As to rumors that Relativity Media could be interested in buying MGM assets, the company says it's not for sale.
Questions? Comments? MediaMoney@cnbc.com