Pathe Rounds Up Short-Term Loans to Buy MGM/UA

Pathe Communications Corp. revealed that it plans to finance its pending purchase of MGM/UA Communications Co. through a patchwork of short-term loans, asset sales by Pathe’s European backers and the possible resale of MGM/UA stock or of new Pathe shares after the merger.

The financially troubled Banque Arabe et Internationale d’Investissement of Paris and S. I. Bank Co. of the Seychelles are among the banks that have agreed to finance the transaction, according to a new supplement to Pathe’s $20-per-share offer for MGM/UA.

It came after the Securities and Exchange Commission asked Pathe for more details regarding the MGM/UA purchase, which is scheduled to close June 15. In its latest supplement, Pathe said the closing, originally scheduled for last Thursday, might be extended again because of the “complexity” of its financing.

Pathe and its president, Italian financier Giancarlo Parretti, are supposed to provide up to $450 million in funding for the $1.2-billion MGM/UA purchase. Time Warner Inc. has agreed to provide the balance of the purchase price under a complex arrangement that will allow the New York media giant to distribute the United Artists library and new MGM, United Artists or Pathe films for 20 years. Pathe has already paid $200 million in deposits toward the deal.

According to the latest disclosures, much of Pathe’s funding will be in the form of short-term loans or advances against transactions planned by companies controlled by Parretti or his associate, Pathe Chairman Florio Fiorini.

In one planned transaction, Parretti’s principal holding company, Comfinance SA of Luxembourg, expects to borrow $75 million from Banque Arabe for one week, then repay the loan by selling three existing Pathe pictures to MGM/UA immediately after the latter company is acquired by Pathe. The Paris-based bank is supposed to supply up to $10 million in additional financing through Sasea Holding, a company controlled by Fiorini.

Banque Arabe is owned by a consortium of about 35 Arab and European banks, according to a New York officer of the bank. Established in 1973 to help invest Arab oil money, Banque Arabe ran into financial difficulties during the oil glut and recently agreed to be acquired by Banque Nationale de Paris in return for a capital infusion under a deal that hasn’t closed.

S. I. Bank of the Seychelles will provide Pathe an additional $17 million by purchasing, at a discount, a $25-million note that Pathe holds as the result of a 1988 sale of some theaters. A Pathe spokesman said he didn’t know if that bank is the same Seychelles bank identified in various news reports as being partially owned by Fiorini.

Credit Lyonnais, a major European bank that was widely assumed to be among Parretti’s lenders, is providing only $15 million under an existing credit line, while United Overseas Bank, a Geneva bank, will advance $12.5 million through Sasea.

“Overall, this doesn’t strike me as being a list of major international financial institutions,” one Los Angeles lawyer who deals extensively with foreign banks said of Pathe’s financing.

“Everything about this transaction is unusual. . . . Most parties who are acquiring entertainment entities do not have such a familial relationship with their banks,” said Jeffrey Logsdon, an entertainment analyst with Crowell, Weedon & Co. in Los Angeles.

Spokesmen for Pathe and Time Warner declined to comment.

According to Pathe’s amendment to its original $20-a-share offer for MGM/UA, the company has discussed reselling MGM/UA shares to Rank Laboratories, a major British film processor; to Cinergi, a company owned by Andrew Vajna, who until recently was co-owner of Carolco Pictures, or to RTL Plus, which wasn’t identified in the filing.

Pathe said it has also talked with Paine Webber Inc. about offering new shares of its own stock once the MGM/UA purchase is complete.

Pathe said it was depending on an array of other transactions by Sasea and Comfinance to provide its portion of the purchase price.

Under one such deal, a Dutch company called Deepbridge BV is supposed to advance Pathe up to $90 million for five months through Sasea, with the money secured by the assets of a related company in Spain.

An additional $50 million is to be advanced for six months against a sale by Comfinance of other Spanish assets to PAN-ASS BV of the Netherlands, while Sasea expects to raise $52 million more by selling its stake in Banca Agricola Milanese to an unnamed financial institution.

Neither Deepbridge nor PAN-ASS is identified in the amended offer. Dutch and West German banks were examining a possible purchase of the Banca Agricola stake, according to a report last year in the Financial Times of London. It wasn’t clear how much Banca Agricola stock Sasea owns.

In another SEC filing, investor Kirk Kerkorian, who controls 72% of MGM/UA, said he may retain up to 1 million shares of MGM/UA, or about a 2% stake, after Pathe’s offer closes. Apparently, Kerkorian’s keeping the stake would reduce Pathe’s purchase price by about $20 million.

Separately, a former Pathe associate, Beverly Hills investor John Di Stefano, was denied entry to New Zealand on Tuesday after immigration authorities in Auckland identified him as the same individual who was convicted of fraud charges in Great Britain and sentenced to a five-year jail term in 1986, according to the New Zealand Herald.

Di Stefano had denied being the same individual in interviews with The Times. He couldn’t be reached for comment on the Auckland news report.

The Italian-born businessman was associated with Pathe Communications Inc. until earlier this year and claims to have been a corporate director and vice president in charge of mergers and acquisitions. In April, however, Di Stefano and Pathe sued each other in a dispute over the exact nature of his position with Pathe and other matters.