MGM Bankruptcy Case Hits Another Snag : Entertainment: One of the firm’s top petitioners, Century Insurance Ltd., rejects two settlement offers.

Settlement negotiations in an involuntary bankruptcy case that could put financially troubled MGM-Pathe Communications Co. out of business were further complicated Friday as one of the petitioners threatened to walk away from the bargaining table.

Century Insurance Ltd., a Cook Islands company that claims to be owed $1.75 million, has reportedly rejected two offers from MGM and its backers. One is a cash payment said to total $350,000. The other is a plan under which the $1.75 million would be placed in a litigation account.

Details of the settlement discussions are contained in correspondence between attorneys in the case. Papers show that MGM’s chief lender, Credit Lyonnais Bank Nederland, is seeking a first lien on studio assets in the case. They also show that creditors have demanded assurances that former MGM-Pathe Chief Executive Giancarlo Parretti will not be put back in control of the company.

Stephen Chrystie, who represents 10 of the petitioners in the $17-million suit, has indicated that he would try to settle with or without Century, the letter shows. But Donald Davies, Century’s president, said he would challenge any settlement that did not include him. “I won’t accept anything except the $1.75 million,” Davies said.

Chrystie declined to comment Friday on specific points in the negotiations. The attorney said: “There have been some settlement negotiations, but no resolution has been reached.”

An MGM spokesman also declined comment on the case. In a court filing earlier this week, however, the Beverly Hills-based entertainment company said “the pendancy of the bankruptcy threatens the very continuity of MGM-Pathe’s business.”

The filing describes MGM as “an industry leader” and a “worldwide institution,” but financial problems have left MGM in disarray in recent months. A cash shortage has prevented the release of several completed films. And Parretti has been forced to hand control of the company to former studio chief Alan Ladd Jr. In addition, the Securities and Exchange Commission is said to be investigating Parretti’s financial dealings in connection with the studio.

Davies’ claim apparently has proved to be the most troublesome for MGM in the Chapter 7 bankruptcy case. The insurance executive maintains that he is owed a 1% fee for writing a $175-million insurance bond that allowed Parretti to complete his $1.4-billion acquisition of MGM last November. Parretti has denied that Davies wrote the bond.

But in a lawsuit that Davies filed against Credit Lyonnais Bank Nederland in connection with the dispute, several allusions to the bond are made by representatives of the bank. Davies also claims that Parretti pledged him stock, including some MGM shares he apparently did not yet own at the time, as collateral for the bond. Those shares give him a sizable interest in MGM, Davies maintains.

Correspondence in the bankruptcy case indicates that MGM and its backers have offered up a plan to put the $1.75 million into a litigation trust account. “The matter is to be tried by a Rent-A-Judge in Los Angeles,” according to the settlement letter, which adds that a trial will commence within six months and that both sides would cooperate in discovery motions.

“If Century wins, it gets the $1.75 million plus its proportionate share of accrued interest,” the letter states. “If Century loses, it nonetheless receives $100,000.”

Documents indicate that the remaining petitioners could be close to an agreement. People familiar with the case say the reported effort by Credit Lyonnais to lay first claim to company assets is the biggest remaining stumbling block.

Creditors who receive residual fees and other ongoing payments from MGM have objected to the notion of taking a back seat to the bank. “It must be made clear that the lien does not affect or cover future residual payments, gross or net profit participations, or ownership allocations of producers, directors, actors and writers who presently have agreements with MGM, including but not limited to our clients,” the correspondence in the case states.

Rotterdam-based Credit Lyonnais Bank Nederland, which is withholding a $145-million cash infusion pledged to MGM pending resolution of the bankruptcy case, could not be reached for comment on its demands. News reports, however, have indicated that the French government is seeking information about the state-owned bank’s links to Parretti. The Netherlands branch of Credit Lyonnais is a subsidiary of the Paris-based banking giant.

Chrystie’s nine clients, excluding Century, would be paid more than $14 million under current settlement discussions, according to the correspondence. The biggest payoff would go to Concorde-New Horizons Corp., which would receive $9 million plus interest in $1-million monthly installments. Concorde, run by filmmaker Roger Corman, claims to be owed the funds in connection with low-budget films that it produced for MGM before Parretti purchased the company.

Others settlement amounts are more fluid. SLM Entertainment Ltd. is to receive $4 million, subject to future discussions, the correspondence states.

The Theatrical and Television Motion Picture Special Payments Fund is to receive $800,000, with another $600,000 to be put in a litigation account. An additional $199,000 is to go into a litigation account for Madata Corp., identified as being associated with actress Talia Shire.

Bill Lanese Advertising & Public Relations would receive $401,431 under the settlement. Another $180,000 would go to Kristan & Co., a New York investment banking firm. Levy-Gardner-Laven Productions Inc. would receive $82,291, and Bartel Design Group would be paid $19,563, according to the correspondence.