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This is what you really want out of Hollywood news stories: interest payment drama! A week ago we told you that MGM was facing possible bankruptcy as a result of the studio’s inability to pay on a $3.7b (billion!) dollar loan. Now the studio has been given a short reprieve, and the Lion’s show will go on at least until the end of the year. And yes, The Hobbit is fine. Thanks for asking.

The short form: MGM has almost four billion in loans, and some bondholders have come calling. A week ago it was decision time: let the studio go into bankruptcy and sell off assets to cover the debt, or try to get bondholders to agree to waive interest payments until early next year. Now Variety reports that MGM has been granted three months of leniency, and won’t have to fork over interest payments through the end of November. That gives the studio a minute to breathe, regroup, and possibly spend those interest payments on something that might make a little bit of money. (Unlike, erm, Fame.)

This isn’t the end of the great Investment Payment Drama of 2009, as when December comes the studio may be right back in the situation where it turns out its empty pockets and shrugs. MGM execs have to submit a restructuring proposal to creditors by November 30, along with a current, reasonable valuation table of studio assets. Reasonable asset valuation? In Hollywood? Ha!

In the meantime, development on The Hobbit continues. THR reports that Warner Bros. is covering immediate expenses to keep the project going forward, and also says that “a recent company audit showed cash flow should be sufficient to keep the lights on [at MGM] for at least another year.” WB is leading production on The Hobbit, so things should be fine on that front.

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