Fight for Control of MGM Begins in Delaware Court
The struggle for control of MGM-Pathe Communications Co. spilled into a Delaware courtroom Tuesday, with an Italian financier and a large French bank accusing each other of broken promises.
Opening arguments began in a Delaware Court of Chancery, the state in which MGM is incorporated, in a lawsuit pitting the studio’s former chairman, Italian investor Giancarlo Parretti, against its largest creditor, Credit Lyonnais Bank Nederland.
The bank is an affiliate of Credit Lyonnais, the French state-owned bank and the world’s 10th largest.
The bank asked Chancellor William T. Allen to support new managers it installed at MGM and prevent Parretti and his allies from acting as officers or directors of MGM. The bank also wants the judge to invalidate Parretti’s attempt to regain power at MGM on June 14.
Parretti bought MGM last November from financier Kirk Kerkorian for $1.3 billion and renamed it MGM-Pathe Communications Co.
In face of serious financial troubles, Credit Lyonnais and Parretti agreed in April that he would yield operating control of MGM in exchange for money to rescue the studio from an involuntary Chapter 7 bankruptcy petition filed by its creditors. The money would also be used to promote and make prints of new motion pictures, including “Thelma and Louise.”
Under the April pact, Credit Lyonnais installed Alan Ladd Jr. as MGM’s chairman and Jay Kanter as chief operating officer.
“This is a story of a broken promise. A promise by Parretti to rescue MGM from bankruptcy,” Richard Holwell, Credit Lyonnais attorney, said in an opening statement.
Holwell said Parretti broke his promise not to meddle in MGM when he called a board meeting in June without a quorum and purportedly was elected chairman.
But Parretti’s attorney, Richard Sutton, said the meeting was not grounds for Credit Lyonnais to break its part of the bargain.
“Evidence will show that . . . MGM, under Ladd and with bank support, failed to adhere to the substance of the corporate governance agreement,” said Sutton, referring to the April deal.