LOS ANGELES -- Hollywood mega-studio Metro-Goldwyn-Mayer Inc. filed for bankruptcy protection on Wednesday.
MGM's bankruptcy plan has the backing of its lenders, so the proceedings are expected to go quickly.
MGM is to restructure and be managed by the co-CEOS of Spyglass Entertainment.
The studio's lenders will trade about $4 billion in debt for stock in the new company, valued at around $2 billion.
Billionaire investor Carl Icahn -- who holds a significant amount of MGM's debt -- has played a big role in the filing. He first backed a rival takeover attempt by Lions Gate Entertainment Corp. Then, last week, he threw his weight behind the Spyglass takeover.
Debt holders such as Icahn, Anchorage Advisors and Highland Capital Management are now set to take over the studio and equity owners such as Sony Corp. and Comcast Corp. will have their stakes wiped out.
MGM said "certain immaterial modifications" convinced Ichan to back the Spyglass plan.
The changes included allowing Icahn to appoint one member of the nine-member board, on which Spyglass' co-CEOs Gary Barber and Roger Birnbaum would also get one seat each.
The modified deal excluded 15 films from the Spyglass movie library such as "Seabiscuit."
That means the stake of Spyglass' co-CEOs in MGM will be less than originally proposed, according to a person familiar with the matter, who spoke on condition of anonymity.
Instead, future projects that Spyglass is developing will be included in the merger, the person said.
In the bankruptcy court filings, MGM also sought approval to spend up to $125 million from its accounts on operations over the next 15 weeks.
About $40 million of that will go toward funding its part of " The Hobbit," the two-part prequel to the "Lord of the Rings" trilogy.
"The Hobbit" is being directed by Peter Jackson and is half-owned by Time Warner Inc.'s Warner Bros., the person said.
The movies have a combined budget of about $500 million.
The remainder of MGM's half is expected to come from newly issued debt.
MGM said in its statement that it expects to raise $500 million after emerging from bankruptcy to fund new films and TV shows.
MGM, founded in 1924, is known for such classics as "The Wizard of Oz" and "Gone With the Wind." It has been bought and sold countless times.
The latest ownership change took place in 2005, when a consortium of private equity groups plus Sony and Comcast bought MGM for $5 billion from a group including billionaire Kirk Kerkorian - his third sale of the studio.
But the debt load was too heavy, DVD sales declined and it only had a handful of hits including " Valkyrie," the World War II action movie starring Tom Cruise that was made by MGM subsidiary United Artists.
Last year, MGM cut a deal to stop making interest payments as its financial troubles loomed.
Time Warner offered $1.5 billion in cash to take over the studio. Lions Gate's merger plan valued the studio at about $1.8 billion.
Last week, Lions Gate sued Icahn, its biggest shareholder, for opposing its merger bid then backing it after he had bought a large amount of MGM debt, alleging he deceived other shareholders to maximize his gains.