Debt-ridden studio MGM has managed to get enough support from lenders to continue its participation in the production of The Hobbit, which Guillermo del Toro is currently developing in New Zealand for release in 2011.  MGM is developing the two Hobbit films “in a 50-50 rights partnership with Warner Bros. New Line unit.”  Earlier reports that suggested that The Hobbit films were in jeopardy if MGM did not receive forbearance on its interest payments (see “Hobbit in Peril”) became moot when J.P. Morgan endorsed a proposal from MGM CEO Steve Cooper to defer interest payments on its debts for the next three months.

According to The Hollywood Reporter MGM’s debt holders are planning to convert debt to equity over the coming months and then auction off the studio’s assets. Along with its control of the James Bond, and The Pink Panther properties, MGM’s rights stake in The Hobbit, which is “broadly seen as a big moneymaker,” is one of the studio’s top assets, and is the reason the lenders agreed to the forbearance for fear of damaging the studio’s market value.