Giancarlo Parretti’s newly acquired MGM/UA bounced a series of rubber checks around town last week but on Friday made good on the ones that mattered most: The company met $26 million in interest payments.
Company sources said late Friday that the two principal bondholders, Mellon Bank and Banker’s Trust, had been paid full interest on 12 5/8% notes due in 1993 and 13% debentures due in 1996.
The company also made good on a bounced check to Dustin Hoffman, said by a source close to the books to be worth just under $500,000 in “Rain Man” monies. But while an earlier check to Tom Cruise for the same film cleared without incident, late “Rocky V” payments in excess of $1 million to Sylvester Stallone and producer Irwin Winkler were still outstanding.
Also allegedly outstanding were payments to producers and writers on the MGM tv shows “In The Heat Of The Night” and “thirtysomething.”
Acknowledging recent credit difficulties, company spokesman Craig Parsons said: “This was an issue of transfers of funds, between the bank and the company, not being made over the [yearend] holidays. It was an unfortunate situation, but it won’t happen again.”
That will come as good news to vendors, including Federal Express, and employees, many of whom found their direct-deposit paychecks for the end of 1990 were not being paid until ’91.
But the news may come too late for analysts and creative talent around Hollywood, who view the production-distribution company with increasing alarm. “I think there is a serious question of solvency there,” one analyst said. “The company has been mortgaged out so heavily that there isn’t any money left to run it,” added another.
“The company is put together with monkey wires,” a producer on the lot said. “There just isn’t any money.”
But while Parretti-bashing remains one of the town’s most popular activities, several sources closer to the company than the analysts, who view it or the producers who work for it, say the Italian financier’s difficulties have been exaggerated.
“The company has significant value that has not been mortgaged,” says a source close to MGM/UA’s accounts. “There are four tv shows in production, and a lot of strong movies waiting to be released, a powerful European cinema chain, and they retain critical rights in important markets for a lot of what’s in their library. These missed payments are only a temporary result of merging two very different companies [Pathe Entertainment and MGM/UA] into one entity. It happened over the holidays, and things got confused between their banker [Credit Lyonnais] and their accountants. That’s it.”
That source and others noted that since the Nov. 1 leveraged acquisition was effected, key layoffs and resignations – including employees in both companies’ finance, payroll and personnel divisions – have made for a rough transition.
That has not prevented an erosion in financial reputation. Last month Moody’s Investor Service downgraded the company’s debt rating to a very poor Caa, from B2, after the company requested a one-month grace period to delay payment on $400 million in former MGM/UA bonds. That one-month period closed Friday when the company made the $26 million interest payments on the bonds. A source close to that deal said a similar glitch to that which withheld employee checks mandated the grace period request.
And while the company continues to keep “In The Heat Of The Night,” “thirtysomething” and “Young Riders” in front of tv audiences, moviegoers have generally ignored recent pics.
MGM’s “Desperate Hours” earned a paltry $2.3 million at the boxoffice. “Rocky V” totted up $38.8 million, a drop from its knockout predecessor and the recipient of dreadful reviews. “The Russia House,” despite fair notices, languishes after three weeks in release at $15 million. Aussie oater “Quigley Down Under,” new regime’s first theatrical, was thrown with only $20 in its saddlebags.
New releases include last weekend’s “Not Without My Daughter” and “Delirious,” a new comedy with John Candy.
In an unrelated incident, MGM/UA last week sued to prevent a gay rights group calling itself the Pink Panthers from using that MGM/UA film series’ lucrative moniker.
(Judy Brennan contributed to this report.)