Metro-Goldwyn-Mayer filed for Chapter 11 reorganization as expected on Wednesday.

The bankruptcy, filed in the Southern District of New York, enables the Century City studio to eliminate more than $4 billion in debt and gives control to a group of hedge fund creditors. They will have Spyglass Entertainment run the studio.

MGM said it had reached a settlement with billionaire investor Carl Icahn that gives him one seat on the board. Icahn, who had accumulated a large chunk of MGM debt, had opposed putting Spyglass in control. He argued instead for a $1.7 billion stock-and-debt offer from Santa Monica’s Lions Gate Entertainment Inc., where he is the largest individual shareholder.

MGM has strong support for its plan from its largest creditors, which are led by JPMorgan Chase and hedge funds Anchorage Advisors and Highland Capital Management. The studio, which hopes to have the prepackaged bankruptcy plan confirmed by the court in 30 days, said it has enough cash to support itself during the bankruptcy proceedings. It plans borrow $500 million to finance operations after emerging from Chapter 11.

“For many months, we have been working with our lenders to explore the strategic options available to MGM to improve MGM's financial position and maximize the company's value," Co-Chief Executive Steve Cooper said in a statement. "By sharply reducing MGM's debt load and providing access to new capital, the proposed plan of reorganization achieves these goals.”

The bankruptcy plan wipes out the equity of the studio’s current owners, which includes buyout firms Providence Equity Partners and TPG Capital and media companies Sony and Comcast. The group took MGM private in a 2005 deal that left the studio with a huge debt burden.

The largest unsecured creditors are NBC Universal Inc., with $34.6 million owed; Showtime Networks Inc., which has a $25.5 million claim; and Rainbow Media Holdings, with $22.9 million owed.

For reprint and licensing requests for this article, CLICK HERE.