MGM/UA: Qintex Hasn’t Delivered Letter of Credit
MGM/UA Communications Co. dropped a new bombshell Thursday in the never-ending saga of its scheduled sale to the Australian Qintex Group with a cryptic announcement that Qintex has failed to deliver a $50-million letter of credit.
Although MGM/UA executives refused to elaborate, sources said last month that the non-refundable deposit was due Sept. 22--one week after Qintex outbid media magnate Rupert Murdoch for the company.
Earlier this week, Qintex Chairman Christopher C. Skase assured the Brisbane Stock Exchange that Qintex had “arranged the security” for the $50-million letter of credit. And in its release, MGM/UA noted that it had been advised by Qintex that security had been posted to a bank.
But neither Qintex nor MGM/UA officials were available or willing to say Thursday why the deposit has been held up.
Daniel Saks, an outside public relations counsel to Qintex, said he could not identify either the bank or security posted.
Modifications Discussed
Earlier in the day, Qintex America’s chief financial officer, Kevin Wallace, insisted that the company is “totally committed to the deal, and ‘full speed ahead.’ ” After the MGM/UA announcement, however, Wallace did not return repeated calls.
In its terse release, MGM/UA said the companies have been discussing “possible modifications of the merger agreement” concerning “appropriate security” from Qintex. The talks do not “contemplate a change in the merger price,” the MGM/UA statement said.
Some investors and entertainment executives have questioned Qintex’s ability to finance the $1.5-billion purchase price and then raise additional operating funds. Several major studio executives have estimated that MGM/UA will need $400 million to $500 million to revive its movie-making business. In addition to the purchase price, Qintex must also assume $400 million in junk bond debt.
Qintex’s price on the Brisbane market slid to as low as 40 cents (Australian) this week, down from $1.50 in March, when Qintex first announced its plan to pay $20 per share to acquire most of the MGM/UA assets.
For the past month, Qintex has insisted that it has lined up about 10 major investors for the deal--even after Qintex sweetened its offer to $25 per share and abandoned the earlier plan to sell back certain MGM assets to Kerkorian.
Recent press reports have noted that Qintex’s Australian businesses may suffer from an Australian airline pilots strike and investor nervousness over financial problems at a rival television operation.
But Skase, in a letter dated Oct. 4, assured Brisbane officials that Qintex’s financial participation in the MGM/UA acquisition would cost no more than $125 million to $150 million. Skase also said MGM/UA’s subsequent financing would be “without recourse” to Qintex Australia Ltd.
MGM/UA shares closed Thursday at $22.50 on the New York Stock Exchange, unchanged from the previous day’s closing. Qintex’s American subsidiary also closed unchanged at $6.25 in over-the-counter trading.
