Pathe Says It Has the Money for MGM/UA Deal : Entertainment: The company says it has put the $967 million that it needed to complete the $1.3-billion buyout in escrow. It won’t say where it got the funds.

Pathe Communications Corp. said Monday that it put checks totaling $967 million in escrow to cover the balance of its $1.3-billion purchase of MGM/UA Communications Corp. but didn’t disclose the source of its funds.

Individuals familiar with the deal said they expect Time Warner Inc., which had backed out of an earlier plan to provide $650 million in funding, to contribute to the latest financing package by purchasing film rights from MGM/UA. Pathe and Time Warner declined to comment.

Pathe had previously deposited $353 million in an escrow account, and about $250 million has already been paid to MGM/UA shareholders in the unusual, multi-step buyout.

Pathe said it expects to complete the buyout by Friday, but only if MGM/UA’s board approves a complex arrangement under which the studio will help finance its own purchase by paying Pathe approximately $700 million for certain European theaters, completed films and other assets. MGM/UA’s board will meet today to discuss the asset purchase, both companies said.

If the arrangement is approved, MGM/UA would apparently finance the asset purchase through borrowings or the sale of rights to its library.

Pathe announced Sunday that it plans to sell domestic television rights to about 1,000 films in MGM/UA’s United Artists library to Turner Broadcasting System Inc. over a 10-year period. Industry observers have valued the deal at $200 million.

That money apparently will be part of the $700 million that MGM/UA will pay for Pathe assets. There have also been reports that a Japanese investor might purchase some MGM/UA film rights.

A Pathe spokesman said his company and its president, Giancarlo Parretti, know where all the financing for the transaction is to come from but won’t identify its sources yet. “More will be disclosed in (Securities and Exchange Commission) filings and so forth,” the spokesman said.

The spokesman confirmed that the checks totaling $967 million were backed by short-term funding that would remain in place only until the asset sale is completed.

Time Warner originally was to have provided financing guarantees for the buyout but later pulled out and filed suit against Pathe for breaching an agreement between the companies. Pathe countersued, and the litigation is still pending in Los Angeles Superior Court.

Pathe owns a large library of films, most of which were produced by its predecessor company, Cannon Group Inc. Pathe has also produced nearly a dozen films that are scheduled for release in the next year by MGM/UA.

Pathe said it expects an independent appraisal firm, Houlihan, Lokey, Howard & Zukin of Los Angeles, to provide MGM/UA’s board with a favorable “solvency opinion” regarding resources of the combined companies. The Pathe spokesman said MGM/UA and Pathe will rely on existing bank lines of credit for movie and TV production funds after the merger.

“Quigley Down Under,” a Pathe film released by MGM/UA last weekend, took in just $3.9 million from 996 screens, according to Exhibitor Relations, a theater consulting firm. MGM/UA has virtually shut down its own production since the buyout was announced last March.

Pathe’s film chief, Alan Ladd Jr., is expected to head movie operations at the combined companies. On Monday, some MGM/UA film executives said they expected their jobs to be eliminated after the merger.

MGM/UA shares closed Monday at $16.50, up 50 cents, in New York Stock Exchange composite trading, before the escrow arrangement was announced. MGM/UA shareholders, including majority holder Kirk Kerkorian, are to receive $17.50 a share in the remaining, final phase of the buyout plan.

Pathe shares closed Monday at $4.25, up 25 cents.