MGM’s Ladd Says Parretti Would Sink Studio
The chairman of MGM-Pathe Communications Co. warned Friday that his studio “will go under” if Italian financier Giancarlo Parretti continues to interfere with its operations.
Veteran studio executive Alan Ladd Jr.'s comments came at a Chancery Court trial that pits Parretti against MGM’s largest creditor, Credit Lyonnais Bank Nederland N.V.
Ladd said that since early this year, MGM has been “bordering right on the brink of not being a major” studio because it does not have a steady flow of products. Ladd said that if he remains in control, he could preserve MGM’s status.
The bank is an affiliate of Credit Lyonnais, the French state-owned bank and the world’s 10th largest. Parretti got $888 million from the bank in connection with his acquisition of MGM-UA.
The bank has asked the court 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 Chancellor William T. Allen to invalidate Parretti’s attempt in June to regain power at MGM.
Ladd said during his second day of testimony that the studio was paralyzed because its bills weren’t being paid after it was acquired by Parretti. He said he was embarrassed and personally humiliated by the situation. “Nobody wanted to do business with us and the credibility of MGM-Pathe was being destroyed,” Ladd said.
He said vendors who used their own money to provide goods and services were losing their homes because the studio had not paid them. At the same time, he said, the company was buying television stations and other concerns.
On Friday, Allen denied Pathe Communication Corp.'s motion to limit the case to whether the bank has the right to take control from Parretti. Pathe is MGM’s majority stockholder. The company did not want Allen to consider whether Parretti had a valid corporate governance agreement with the bank. Pathe has filed suit in Los Angeles Superior Court to have that issue resolved.
The bank took studio management away from Parretti and gave it to Ladd as part of a corporate governance agreement.
Parretti, who acquired the studio in November, agreed in April to yield operating control of MGM in exchange for money to rescue MGM from an involuntary Chapter 7 bankruptcy petition filed by the studio’s creditors. The money also would be used to promote and make prints of new motion pictures such as “Thelma and Louise.”
Under the agreement, Parretti could regain control of the studio if he reduced his debt to below $125 million by Nov. 30.