Hobbiton in limbo amid studio crisis

The director of the Lord of the Rings prequel The Hobbit has quit and production has been stalled "indefinitely" with the future of film studio MGM in question.

The move is likely to impact on Matamata, which had been gearing up for filming on the nearby Hobbiton set, under reconstruction for the movie.

Guillermo Del Toro quit as director of the two movies but said in a press release today that he will still help write the screenplays for the Lord of the Rings prequels.

"In light of ongoing delays in the setting of a start date for filming The Hobbit I am faced with the hardest decision of my life," the Mexican filmmaker said.

"After nearly two years of living, breathing and designing a world as rich as Tolkien's Middle Earth, I must, with great regret, take leave from helming these wonderful pictures."

Speaking at a press conference late last week, The Hobbit director Guillermo del Toro said there was no "green light" for the film because MGM needed to sort out its financial situation.

MGM was put up for sale last year after falling millions of dollars into debt, but a buyer is yet to be found.

"We've been caught in a very tangled negotiation," del Toro said. "There cannot be any start dates until the MGM situation gets resolved. They do hold a considerable portion of the rights."

Russell Alexander, who operates the Hobbiton Movie Set and Farm Tour business near Matamata – where scenes from Peter Jackson's Rings trilogy were filmed – said he could not comment on the situation due to confidentiality clauses in contracts he had.

He said it was "business as usual" with tours of the sets, but he would not be drawn on the delay with the filming of The Hobbit, or how it would affect his operation.

Jackson, to be producer on the new film, recently dismissed rumours of trouble with the picture, insisting: "It's not really been delayed, because we've never announced the date." The Hobbit is scheduled for release in 2012.

Del Toro and producer Sir Peter Jackson said they remained committed to the films and would do everything they could to satisfy fans.

Del Toro said he would be first in line to see the finished films.

"I've been privileged to work in one of the greatest countries on earth with some of the best people ever in our craft and my life will be forever changed.

"The blessings have been plenty, but the mounting pressures of conflicting schedules have overwhelmed the time slot originally allocated for the project."

Jackson told fan website TheOneRing.net: "We feel very sad to see Guillermo leave The Hobbit, but he has kept us fully in the loop and we understand how the protracted development time on these two films, due to reasons beyond anyone's control - has compromised his commitment to other long term projects.

"The bottom line is that Guillermo just didn't feel he could commit six years to living in New Zealand, exclusively making these films, when his original commitment was for three years. Guillermo is one of the most remarkable creative spirits I've ever encountered and it has been a complete joy working with him."

Jackson told TheOneRing.net that he would discuss options for a new director with MGM this week.

"We do not anticipate any delay or disruption to ongoing pre-production work," he said.