Company Town : MGM Future May See Rewrite--for Better
The script at Metro-Goldwyn-Mayer may be about to undergo a rewrite that could well lead to a happier ending.
For the last three years, the year 1997 has hung like a cloud over the venerable studio.
The reason: That’s the year by which the French bank Credit Lyonnais must sell MGM, which it took over 1992 when Italian businessman Giancarlo Parretti defaulted on his loans. Blame the deadline on an arcane 1956 law on bank holding companies that gives banks five years--actually two years, renewable in three one-year increments--to get rid of any non-banking operation they have seized.
But the clock may soon stop ticking. Why? MGM may not be owned for much longer--at least technically--by a bank.
The kind of breathing room that would come from having the deadline lifted would presumably be good news for the company’s management, which has been hearing the clock tick louder as it tries to go about the herculean task of rebuilding MGM into a viable business. There are few quick turnarounds in Hollywood, where projects take years to develop and reach the screen.
The development doesn’t stem from an outright sale of the studio by Credit Lyonnais, but rather is a potential side benefit from a massive reorganization of the troubled state-controlled bank--which some European wags have dubbed “Discredited Lyonnais”--now being plotted in France.
Although a number of technical, legal and political issues are yet to be resolved, what is known so far is that plans are afoot to spin off Credit Lyonnais’ non-bank assets into a separate, stand-alone company backed by the French government.
The long-term goal is to return Credit Lyonnais--which has been hammered by bad loans ranging from real estate fiascos to a batch of troubled Hollywood companies--to its commercial banking roots. The stand-alone company would then run the assets and divest them over time.
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Bank officials declined to comment. But banking lawyers and sources close to the studio note that the bank may be able to convince regulators--if all goes well in the restructuring--that Credit Lyonnais no longer legally owns the studio.
“Assuming that the entity is not controlled directly or indirectly by the bank, they would be out from under the five-year problem,” said H. Rodgin Cohen, a partner with New York law firm Sullivan & Cromwell and one of the nation’s top banking lawyers.
Cohen says the litmus test would be whether Credit Lyonnais would end up controlling or owning a significant chunk of the new company holding the assets to be spun off. Generally, owning a stake of less than 25% has a good chance of passing muster with regulators.
Ultimately, the decision will be up to the Federal Reserve Board, which enforces bank holding company laws. Banking sources say regulators historically have been less strict with foreign banks facing the problem than with domestic banks.
All this presumably is good news for the management team--led by MGM Chairman Frank Mancuso, MGM President Mike Marcus and United Artists President John Calley--installed in mid-1993. The three have been trying to rebuild the studio to the point where it can release 20 movies a year--as a major studio would.
So far, success has been mixed. Last fall’s science fiction film ‘Stargate” was a hit, although the holiday release “Speechless” was a disappointment.
This year marks the first in which the company has had a full slate of films under the current regime, including such high-profile projects as “Rob Roy” with Liam Neeson and Jessica Lange; “Tank Girl” with Lori Petty; the new James Bond movie, “Goldeneye,” with Pierce Brosnan, and the pirate epic “Cutthroat Island” from ailing Carolco Pictures, with Geena Davis and Matthew Modine.
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Three-point play: The furor unleashed by film critics over the lack of a documentary Oscar nomination for Fine Line Features’ inspirational “Hoop Dreams” has at least some silver lining for the film.
Growing curiosity about the documentary--a film about two high school basketball stars in Chicago who dream of becoming the next Isiah Thomases--and the Academy Awards controversy has helped put “Hoop Dreams” on the verge of passing “Roger & Me,” the satirical film about General Motors, as the industry’s top-grossing documentary.
“Roger & Me” did about $6.7 million at the box office. “Hoop Dreams” has grossed about $5.8 million and is still averaging about $500,000 a week.
The film is getting a boost partly due to an aggressive grass-roots program underwritten by Nike. It provides discount tickets to young people and community groups. So far, about 50,000 youths have seen “Hoop Dreams” that way.
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What about Inc.?: An important announcement from DreamWorks, the new studio being formed by Steven Spielberg, Jeffrey Katzenberg and David Geffen: Drop the SKG.
Sick of being called DreamWorks SKG, the fledging studio sent out a press advisory declaring that SKG has never been part of the official company name. The company never bothered to announce its name formally, and the confusion apparently stems from initial press reports which took the name from ads in which the initials SKG (for each of the three) appeared to be part of the name.
The SKG-less studio did have an important announcement Thursday: It has signed a 10-year pay-TV deal with Home Box Office--which also doesn’t have SKG in its name. Some say the deal could provide up to $1 billion to DreamWorks over the years.
