Krane Quits as Chairman, Chief of Troubled MCEG

In an expected move, Jonathan D. Krane resigned Friday as chairman and chief executive of the financially troubled Management Co. Entertainment Group.

Krane’s departure comes as MCEG is fighting off involuntary bankruptcy proceedings. The firm is also in default on more than $100 million in debt owed to creditors.

Raymond H. Godfrey Jr., the company’s president and chief operating officer, was named as Krane’s temporary replacement. Godfrey, in a prepared statement, said Krane’s resignation was part of the company’s financial and organizational restructuring.

Godfrey added that Santa Monica-based MCEG expects to enter into a management consulting arrangement with an investor group headed by former 20th Century Fox Vice Chairman Norman Levy. Godfrey did not elaborate, but Levy reportedly demanded Krane’s resignation as part of the agreement.

One report had the 38-year-old Krane, known for his brash and flamboyant style, relinquishing control of the company as early as last week. Financial analysts who follow the company said Krane’s departure should make it easier for MCEG to deal with its creditors.

“His resignation may have been required by creditors,” said analyst Paul C. March of the Los Angeles brokerage Bateman Eichler, Hill Richards. “He was part of the problem, and you don’t want the problem sitting next to you.”

Krane, who is married to actress Sally Kellerman, founded MCEG three years ago. The company’s stock soared last year after it produced the hit “Look Who’s Talking.” But it has been dogged by financial problems since then. Many observers maintained that MCEG overextended itself when it paid $83 million for Virgin Vision Ltd., a British-based international distribution company.

MCEG has been forced to negotiate several extensions on debt payments from its major creditor, GE Capital, a unit of General Electric Co. It has also laid off more than 100 employees.

A group of creditors filed an involuntary Chapter 7 bankruptcy petition against MCEG last month.