Court Urged to Name Trustee to Run Grant

A creditor group that includes some of Hollywood’s largest studios Thursday urged a federal bankruptcy judge to appoint a trustee to run Grant Broadcasting System, contending that the three-station television broadcaster’s principals have mismanaged the firm and improperly used assets for their personal benefit.

In a court filing, the group contended that four Grant Broadcasting principals used part of the proceeds of an $85-million issue of high-risk, high-yield “junk bonds” to reduce their personal liabilities for the firm’s debts, thus reducing their potential losses when the company sought bankruptcy protection last December. It said Grant’s management had “offered no satisfactory explanation” for spending $22 million of bond proceeds that had been earmarked for use as working capital.

Among Creditors

Among the several dozen creditors joining the motion were MCA, which is owed about $43 million by Grant for TV programs it was to supply over the next five years; Lorimar-Telepictures, which is owed $19 million; 20th Century Fox, which is owed $17 million, and Paramount, which is owed $14 million.

The principals named in the court papers were Milton Grant, company founder and chief executive; Sidney Shlenker, the chairman, and Clarence Mayer and Livingston Kosberg, both directors.

Grant Broadcasting owes program distributors a total of about $225 million, and its financial troubles have already taken a toll on the recent financial results of MCA, Lorimar-Telepictures, Viacom International and others. The big distributors fear that if Grant is able to shed much of its debt through a bankruptcy reorganization, many other troubled broadcasters will attempt to do the same.

Replacement of a company’s management by a trustee in such a Chapter 11 proceeding is an unusual step. In a hearing early Thursday, Judge David Scholl said he would have looked more favorably on the creditors’ motion if it had been made earlier in the case.

Repayment Schedule

Grant officials, meanwhile, have asked the court to approve an agreement with Viacom under which Grant’s long-term debts to the program distributor would be cut to $28.7 million from a current $35.9 million, and repayment stretched to 6 1/2 years from about 3 1/2. The deal would cut monthly payments to about $400,000 from a current $800,000, thereby achieving Grant’s stated goal of reducing current debts by 50%.

Marc Sonnenfeld, an attorney for Grant, said Viacom’s large inventory of old sitcoms and dramas may give Grant more than half the programming it needs, and give the company leverage in its negotiations with the other program distributors.

He said the creditors’ motion was a “desperate attempt to throw off” the Viacom settlement. He denied allegations of self-dealing and mismanagement.