J.P. Morgan Leading 2-Pronged Effort in $1.3B Buyout of MGM

Showing the breadth of its acquisition expertise, J.P. Morgan & Co. is leading both the advisory and lending efforts in the $1.3 billion buyout of Metro-Goldwyn-Mayer Inc.

The blue-chip bank acted as adviser to MGM chairman Frank Mancuso, leader of the management group that on Tuesday agreed to buy MGM from Credit Lyonnais, the French bank that has owned the movie studio since 1992.

It is also providing $800 million in bank financing to the group, which includes financier Kirk Kerkorian and the Australian broadcasting firm Seven Network Ltd.

"This is the kind of seamless transaction that integrates vertically between global mergers and acquisitions and global credit and horizontally across regions," said Kenneth McCormick, a managing director and head of J.P. Morgan's Los Angeles investment bank.

The MGM deal is just the latest example of how commercial and investment banks are fighting to provide as many services as possible to merging corporations.

J.P. Morgan had never worked with Mr. Mancuso or MGM before. But its Paris office had previously advised Credit Lyonnais on several mergers, and its New York office was ready to step in with a loan for the proposed MGM buyout.

"From the inception on the mergers and acquisitions assignment, we brought our credit colleagues into the effort to look at whether we could help create an organization that was bankable in the minds of the market," Mr. McCormick said.

When Mr. Mancuso's team submitted a bid for the studio in June, J.P. Morgan indicated its confidence both in his leadership and in its own ability to provide the funding, if the deal included sufficient equity support.

Once Mr. Mancuso brought Mr. Kerkorian on board, J.P. Morgan stepped forward with an $800 million loan, which it plans to syndicate. That loan is divided into a $450 million term loan and a $350 million revolving credit that will provide working capital.

Though some market sources suggested that the credit is a challenging one, J.P. Morgan's strong corporate reputation could propel it through the market.

"This is obviously going to be a fairly tortured story," said one syndicated lender. "The fact that (Credit Lyonnais) effectively owned and operated the studio for so many years makes this a real storied credit."

Mary E. Watkins, a managing director and the head of the loan syndication group at J.P. Morgan, expressed confidence in the bank's ability to syndicate the deal.

"This is a media client with a fabulous franchise and asset base and, at the moment, there is a great deal of interest in the loan syndication market for this type of credit," she said.

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