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Help - MGM Question? (Patreon)

Published:
2020-09-10 16:36:29
Imported:
2023-05

Content

I'm learning about MGM for a potential video and came across something that I hope someone here can confirm. I'll link the form below but on page 99 it says they took out an almost $2 billion loan in 2004 and used almost all of it to fund a special dividend to its shareholders. Considering a single person owned over 70% of the company, to me it looks like he effectively took out a loan in the company's name and collected the proceeds from it. Then a year later he sold the company to Sony who assumed the debt in the transaction. 

Is that the way you read it or am I missing something here?

https://www.sec.gov/Archives/edgar/data/1026816/000119312505037623/d10k.htm

Comments

Kevin Furr

Yeah I'd say that's it, pretty clearly: Note 6: Proceeds from the loans under the 2004 Credit Facility were used to finance the payment of a $1.89 billion special one-time cash dividend to stockholders on May 17, 2004 (see Note 8)... Note 8: Stockholder Dividend. On April 26, 2004, the Company declared a special one-time cash dividend of $8.00 per share to stockholders of record on May 7, 2004, which was paid on May 17, 2004. The cash dividend, aggregating approximately $1.89 billion, was financed by borrowings under the 2004 Credit Facility (see Note 6).

Anonymous

This gives a really good explanation - http://pages.stern.nyu.edu/~adamodar/New_Home_Page/articles/MGMspecialdividend.htm

Anonymous

A friend pointed out that, even if this is exactly what happened, Sony would've noticed the debt and adjusted their asking price accordingly. Or at least, should have.

Anonymous

You are correct that MGM took out the loan and issued the dividend which gave Kerkorian a large share of his investment back, but in raising the debt of MGM the price received from Sony and partners would have been summarily decreased.