Moody's rates MGM, loan B1

Moody's Investors Service said it assigned a B1 corporate family rating and B2 probability of default rating to Metro-Goldwyn-Mayer Inc., along with a B1 (LGD 33%) rating to MGM's proposed $250 million five-year senior secured revolving credit facility and its proposed $250 million six-year senior secured term loan.

The company is expected to emerge from bankruptcy shortly and is expected to be owned substantially by its pre-bankruptcy debt holders, which have agreed to convert their debt to equity as part of the restructuring, Moody's said.

The new bank facility will be used for working capital needs and for general corporate purposes, including funding new film production costs and to pay transaction costs, the agency said.

The outlook is stable.

The ratings reflect the company's plan to rebuild its inherently high risk film production business to keep its library fresh, Moody's said, and a decaying asset base represented by a vintage film and television library.

The ratings are impacted by the challenge to turn around the library's declining revenue trends in the home video and syndication channels by growing digital distribution revenues and improving contract renewal rates, the agency said.

Mitigating some of these concerns is the strong asset value of the library as compared to an expected moderate level of debt to be maintained on the company's balance sheet, Moody's added.

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