DEALMAKERS OF THE YEAR - Skadden

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americanlawyer.com april 2011
top transactions lawyers 2011
dealmakers
of the year
skadden partner Jay Goffman channeled his inner Winston Churchill
and led MGM in and out of bankruptcy in an unprecedented 29 days.
Photographs By Paul Godwin
As the nation finally shook off
the recession, lawyers focused on
fixing the damage.
When Skadden, arpS, Slate, Meagher & FloM
restructuring partner Jay Goffman stood before a
Manhattan bankruptcy court judge last November to
ask for Chapter 11 protection for Metro-Goldwyn-
Mayer Inc., it wasn’t the start of a drawn-out
restructuring but rather the coda: Goffman had a plan
in place that had been approved by almost all of the
studio’s 350 secured lenders, all but ensuring that there
would be no unexpected court battles.
Goffman likes his court appearances short and
sweet. Ever since 1991, when he pushed through one of
the earliest prepackaged bankruptcies, for now-defunct
computer peripherals company Memorex Telex N.V.,
Goffman has done more to promote the virtues of the
lightning-quick filings than perhaps anyone. By his
own count, he’s done at least 15 prepacks, including
the first such plan approved over creditor objections,
for In-Store Advertising, in 1992. He also handled the
first prepack that was approved in under 30 days, a 13day
bankruptcy for Harvest Foods Inc. in 1997, and
the shortest, a one-day in-and-out affair for Blue Bird

By the time MGM got to bankruptcy court,
its lawyers had already scripted a Hollywood ending
for the once-legendary movie studio.
Box office record
Bus Corporation, in 2004. “I believe in them,” Goffman says. “My job
isn’t to take a company and do a long, drawn-out restructuring. My job is
to take it, fix the problem, and give it back.”
Enter MGM. Its troubles were rooted in a 2005 leveraged buyout
that heaped $4 billion in debt on the studio at a time when DVD sales
were plummeting. In early 2009 MGM’s board brought in turnaround
executive Stephen Cooper to deal with the crisis. He, in turn, tapped
Goffman at the urging of Skadden private equity cohead Nick Saggese,
who was close to an MGM board member. (Saggese recently became an
adviser to the investment bank Moelis & Company.) Goffman “has a
very open mind about how to deal with trouble,” says Saggese, whose last
matter at Skadden was assisting Goffman on the MGM filing.
Goffman and Cooper agreed that a prepack was the best strategy. For
companies like MGM, with dozens of foreign affiliates exposed to foreign
insolvency proceedings and core assets tied up in intellectual property, a
long stay in bankruptcy court could be fatal. The disposition of IP assets
“is a very gray area in bankruptcy,” says Cooper. “We had IP, and we had
intellectual capital. If we had lost our IP, our intellectual capital would
have been useless.”
But MGM’s lenders initially did not want to be in the business of
owning a studio. To accommodate their demands, Cooper put MGM on
the block, but the auction drew only bottom-fishers.
Goffman’s mission was to get the lenders to see the wisdom of taking
over MGM—and perhaps selling the company at a better time, minus
the debt. Ultimately, he
prevailed. “Everyone
deal in brieF
had their own view of
what should be done,”
MgM bankruptcy
says Simpson Thacher &
Assets $2.67 billion
Firm’s role Debtor’s Counsel
By Julie Triedman
Bartlett’s Peter Pantaleo, counsel to JPMorgan
Chase & Co., the agent to the secured lenders.
Goffman kept his ego out of it, he says, and helped
lenders find common ground. Goffman “doesn’t
elevate problems into disputes,” notes Pantaleo.
By October, Goffman and Cooper felt
they had the votes. But after the creditors had
received their ballots on the proposed plan, the
distressed investor Carl Icahn, who had been
busy snapping up MGM debt, demanded that
the vote be delayed. Icahn threatened to go to
court if necessary, claiming that he represented
a large but unidentified group of aggrieved
debtholders.
Cooper and Goffman called Icahn’s bluff.
And when the votes were in, 80 percent were
for the plan—more than the minimum required
for a prepack. Still, rather than risk litigation,
MGM extended an olive branch to Icahn,
offering him a board seat. Icahn threw in his
vote, pushing creditor support to 96 percent.
Twenty-nine days later, MGM emerged, with
$500 million in the bank and its $5 billion
in debt reset to zero, making it the largest
bankruptcy ever to be completed in under 30
days—and ensuring the next round of James
Bond and Hobbit films.
E-mail: jtriedman@alm.com.

jay goffman | Skadden, Arps
Reprinted with permission from the April 2011 edition of THE AMERICAN LAWYER © 2011 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is
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