Warner Bros. has taken over international theatrical rights to Peter Jackson's "The Hobbit" from MGM, as well as video rights.
In exchange, MGM gets the loan money it needs to finance its half of the ambitious two-picture project.
Warners/New Line already owned domestic rights to the "Hobbit" adaptation, so they will now be able to collect a worldwide distribution fee, according to insiders.
The deal was announced by Warners and Spyglass toppers Roger Birnbaum and Gary Barber, who are now in control of the newly restructured MGM.
The pact resolves the prickly question of how MGM will pony up its half of the budget, with the other half coming from Warners/New Line.
In recent bankruptcy papers, MGM said it needed a loan of $265 million-$275 million for the two "Hobbit" movies, which are projected to cost at least $500 million to produce.
MGM will still retain international television licensing to the films.
Warners and MGM will collaborate on marketing and release plans.
Two films are set to begin production in February, with release dates targeted for December 2012 and December 2013. Both will be filmed in Digital 3D.