Despite a cool initial reception in the loan syndication market, J.P. Morgan & Co. has closed an $800 million deal for Metro-Goldwyn-Mayer Inc.
The bank loan, which J.P. Morgan fully underwrote, supports future film production at the studio recently bought by MGM chairman Frank Mancuso, financier Kirk Kerkorian, and the Australian broadcasting firm Seven Network Ltd.
J.P. Morgan had acted as mergers and acquisitions adviser in the buyout.
The leveraged loan was by no means an instant hit for the blue-chip bank, which consistently ranks among the top tier of investment grade lenders but does not have as much of a track record with noninvestment grade transactions.
In the face of lender hesitation, Morgan had extended the deadline for loan commitments, to this Wednesday from last Tuesday, and altered terms of the deal.
Some said that Morgan's lack of noninvestment grade execution expertise explained why the MGM deal did not sail through a market hungry for higher- yielding loans.
Others cited the structure of the deal. Although the loan is for noninvestment grade company, it is structured like an investment-grade credit, allowing MGM access to the entire loan as it needed.
Critics said the borrowing base should have been tied to the receivables in the film library.
MGM's troubled recent history would have made the deal a tough sell for any bank, observers said.
In the end, Morgan landed commitments in excess of $620 million.
The deal included a $100 million institutional portion, which brought in over $300 million.
"We're excited and pleased with the transaction," said Martin Pryor, a Morgan vice president. "We met our expectations."
Mr. Pryor would not specify how much MGM debt the bank was holding on its books, but called it a "comfortable" level.
Bankers said the deal was able to bring in those commitments because the structure changed, including a reduction in the duration of the $450 million revolving credit to five years from seven.
Mr. Pryor, however, said that such changes were made before the bank meeting, and were not made in response to any concerns voiced by the lending community.
BankAmerica Corp. and Societe Generale each committed $100 million. A long-time banker for Mr. Kerkorian, BankAmerica was a syndications agent on the deal, and Societe Generale, a documentation agent.
More than 20 institutions committed to the deal, including Long-Term Credit Bank of Japan, Bank of Nova Scotia, Unionbancal, Bank of Hawaii, and Fleet Bank.
Mr. Pryor said Morgan will continue to "aggressively pursue" opportunities in film finance.
