‘No Time to Die’ for Hedge-Fund Manager’s James Bond Bet

Hedge-fund manager Kevin Ulrich has a lot riding on the latest James Bond film. But after the coronavirus pandemic destroyed movie-theater attendance and pushed “No Time to Die” out to next year, the odds of a big payday anytime soon are getting longer.

Mr. Ulrich’s New York hedge fund, Anchorage Capital Group, is the largest shareholder of the studio that owns the Bond franchise, MGM Holdings Inc. Its hope was that a blockbuster release would increase MGM’s value, while creating publicity that could spark interest from a buyer for the company.

But MGM earlier this month delayed the film’s global premiere to April 2021, from this November.

As the catalyst for a potential payoff is delayed, pressure is mounting on Mr. Ulrich, who is chairman of MGM’s board. Some Anchorage clients have asked the hedge fund whether the perks and privileges that come with being a Hollywood chieftain have influenced Mr. Ulrich’s call to stay with MGM, the lengthiest and largest investment in Anchorage’s history. Other MGM investors have asked the same.

MGM’s private stock hovers around $75 a share, far north of the $17 a share it commanded coming out of bankruptcy in 2010 but well below the roughly $120 it traded around in 2018 in hopes of a deal. It has had no chief executive for more than two years.

Mr. Ulrich declined several requests for an interview.

He has told investors he should be involved in MGM given its status as Anchorage’s largest investment, clients said. As of September, it was a more than $1 billion position making up 14% of the firm’s $8.4 billion hedge fund. He also told clients before the pandemic that he limits his travels to Los Angeles and conducts much of MGM’s business by phone.

In recent months, Mr. Ulrich has said he is working toward a deal and has cited Amazon.com Inc., AMZN 3.01% Apple Inc., AAPL 1.74% Comcast Corp. CMCSA -0.99% and Facebook Inc. FB 0.26% as possible buyers. He has also said that while MGM’s production business has suffered because of the pandemic, its library of more than 4,000 titles has become more valuable because of the dearth of new content.

Apple declined to comment, and Comcast didn’t have an immediate comment. Amazon and Facebook didn’t reply to requests for comment Saturday.

A person close to Anchorage said Mr. Ulrich believes MGM is a more-attractive asset because it hasn’t released “No Time to Die,” giving a buyer control over its launch and distribution.

MGM has a deal with Universal Pictures to distribute “No Time to Die” internationally; a new owner would likely need to compensate Universal if it decided to work with another distribution partner, said a person familiar with how the distribution landscape works.

MGM’s fate takes on outsize importance at Anchorage, which like other investors in distressed or beaten-down assets has struggled during a technology-led bull market. Assets in Anchorage’s flagship fund have shrunk by more than 40% in less than three years, from $14.6 billion at the end of 2017. A person close to Anchorage said the hedge fund stopped taking in new money in 2017, and added that other parts of Anchorage’s business have grown, bringing the firm’s overall size to $25 billion.

Despite a management restructuring at the hedge fund last fall, Anchorage has continued to struggle. This year through September, the flagship fund was down 1.4%, said a person familiar with the firm.

Mr. Ulrich’s big bet on Hollywood had its beginnings in 2010.

MGM was emerging from bankruptcy at the time, and a group of hedge funds that had been creditors became shareholders. Chief among them was Mr. Ulrich’s Anchorage.

The plan—a prescient bet that forms of distribution would change and there was a benefit to owning content—was to boost the value of MGM’s languishing film and television library with new hits and then exit through an initial public offering or the sale of the studio. The vast library includes the James Bond and Rocky franchises and would serve as collateral, limiting potential losses for the funds.

Anchorage started buying up senior debt in MGM for about 50 cents on the dollar. The troubled studio had been struggling to service some $4 billion in debt as DVD sales plummeted. It filed for bankruptcy and emerged in December 2010 under new management, including Hollywood veteran Gary Barber as chief executive. Mr. Ulrich took a seat on the board at the time.

Davidson Kempner Capital Management LP, Highland Capital Management LP and Solus Alternative Asset Management LP also converted their debt to equity, with Highland and Solus taking board seats in 2010. Other funds, including Litespeed Management LLC and Owl Creek Asset Management LP, bought shares after MGM emerged from bankruptcy.

MGM was close to a deal with a Chinese buyer in 2016 for roughly $8 billion, said people familiar with the matter. Mr. Ulrich, a board member at the time, was supportive of the deal, said a person close to him. The deal fell apart as China cracked down on overseas investments, the person said.

In 2018, Mr. Ulrich, by then the board chairman, and others on the board fired Mr. Barber for having early, unsanctioned conversations with Apple to sell the studio for more than $6 billion. The preliminary talks fell apart when he was ousted. Minority shareholders protested, with Owl Creek founder Jeffrey Altman sending a letter to the board saying Owl Creek and other shareholders wanted a deal.

Mr. Ulrich told unhappy investors he could sell the studio for more than $8 billion in two to three years, MGM investors said.

An MGM spokeswoman last week said, “The Apple deal was a rumor.”

Anchorage’s investment has come with myriad perks for the 50-year-old Mr. Ulrich, a film and television buff who speaks about the glamorous legacy of MGM.

After hiring a boutique public-relations firm to bolster his Hollywood profile, he has become a familiar presence on star-studded red carpets and at Hollywood parties. The firm, Frank PR, has caused frustration inside MGM over time by frequently asking MGM executives for help getting Mr. Ulrich into events, including InStyle’s party at the Toronto film festival and pre-awards show parties at talent agencies Creative Artists Agency and WME, a unit of Endeavor Group Holdings, said people familiar with the matter.

Anchorage and MGM declined to say who paid Frank PR for its work for Mr. Ulrich. Frank PR didn’t respond to requests for comment.

Mr. Ulrich frequently calls into MGM’s office of the CEO—a structure that has included roughly a dozen people—to ask about the casting of specific actors and actresses in MGM projects, said people familiar with the matter.

MGM has been a controversial investment inside Anchorage.

Tony Davis , Anchorage’s co-founder, voiced concern about how large a position MGM had become for the hedge fund, said people familiar with the matter. Mr. Davis retired from Anchorage in 2015, leaving few who would challenge Mr. Ulrich as directly.

Mr. Ulrich’s decision to sit on MGM’s board also sparked discussion inside the firm. Others from Anchorage had frequently taken on directorships, but it was the first time Mr. Ulrich had done so. Mr. Ulrich took his second-ever board role this September, serving as chairman of J.Crew Group Inc. when it emerged from bankruptcy.

Despite hits such as “Creed,” the 007 films and the critically acclaimed TV shows “The Handmaid’s Tale” and “Fargo,” MGM has suffered in recent years from declining cash flow and a high debt load, which stood at $2.3 billion as of August. The debt relates to its 2017 acquisition of and investment in the pay-television channel Epix, investments in big film projects and the studio’s repeated share buybacks.

The length of time MGM has gone without a deal has frustrated some other hedge funds that effectively remain locked into the studio while they await a deal. A poison pill implemented in 2013 allows MGM to dilute the voting stake of shareholders working as a group, limiting the ability of minority investors to exert their influence.

“At the end of the day, the stock price has come down pretty significantly since Gary was removed. The market has kind of spoken,” said an investor.

Still, he said, the lengthy investment could prove worthwhile if MGM sold soon for $9 billion or more.

—R.T. Watson contributed to this article.

Write to Juliet Chung at [email protected]

The post ‘No Time to Die’ for Hedge-Fund Manager’s James Bond Bet appeared first on WSJ.


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