MGM-Pathe Tells Creditors It Will Pay Off All Claims

MGM-Pathe Communications Co. has notified creditors who threatened to put the company in bankruptcy that it is ready to pay their claims in full.

A creditors group with about $20 million in claims had told the financially troubled studio that it planned to file a petition seeking involuntary bankruptcy for MGM under Chapter 7 of the U.S. Bankruptcy Code. Under that provision, three or more creditors can force a debtor to pay bills, liquidate or seek court protection while operating under Chapter 11 of the code.

Stephen Chrystie, an attorney for the creditors group, said he received a letter last weekend promising the payment. “We were pleased to receive the letter and look forward to working out a procedure with the company for an immediate payment,” Chrystie said.

Chrystie declined to identify the creditors, citing fear that MGM might pay only enough claims to disarm the bankruptcy threat. A studio spokesman said the company is negotiating to receive a $250-million loan from Credit Lyonnais, a French government-owned bank.