The crippled MGM/UA-Pathe combine sits paralyzed waiting for its commander, Giancarlo Parretti, to return from Europe, pockets full of cash. But waiting for Giancarlo begins to look like waiting for Godot. Will he come? Will he have the money? Will it be enough? And for how long?
The word put out by Pathe sources is that Parretti’s monthslong financial foray to Europe has borne fruit. They claim that European business concerns have guaranteed new loans of up to $250 million, and that the money would be in Los Angeles over the weekend or early this week. Most of the money apparently comes from Silvio Berlusconi’s Fininvest Group; some comes from Credit Lyonnais, Pathe’s traditional banker, and other lenders.
Berlusconi’s top officers are known to have chartered a jet to Los Angeles with a view to making what one source calls “a very substantial investment.” And while Credit Lyonnais is believed to be helping ease Parretti’s current crunch, its contribution is said to be smaller than Berlusconi’s.
Nonetheless, it is clear that damage has been done:
* The viability of the MGM/UA distribution apparatus has been compromised as release dates are postponed because of lack of p& a money, and by the disappointing performance of “Rocky V” and other recent releases.
* The company’s cash flow problems have hurt its ability to make deals with major talent, and have forced vendors to deal with the studio on a cash-only basis.
* The future of Alan Ladd Jr., the company’s principal link to the film community, is up in the air. Though Ladd’s official position is that he is staying put, his associates say he is exploring other options, one of which may be a reinstatement of his production company at Warner Bros.
The immediate future of other MGM/UA and Pathe officers remains in doubt. Parretti associate Florio Fiorini’s whereabouts could not be determined last week – his office insists he is in Italy following the death of his father. But Fiorini recently told Italian daily La Repubblica that he is stepping back from his Italian and European investments. Rumors that he has had a falling out with Parretti could not be substantiated.
Pathe chief operating officer Yoram Globus has been out of commission for health reasons, entering Cedars-Sinai hospital last week for what sources call “exploratory abdominal surgery.” While he may be released as early as Monday, Globus will not be returning to his post immediately.
Pathe spokesman Craig Parsons and Pathe sources deny reports that Ladd and his entire creative team have resigned and are headed for Warners. They further deny that MGM/UA CEO Jeffrey Barbakow has resigned and is to open his own investment banking firm.
“Laddie is certainly disgruntled and unhappy about several things,” admits a Pathe source, in reference to the studio’s failure to come up with the $7 million p& a budget required to open its next feature, “Delirious.” “But when Giancarlo returns with the European money, those things won’t exist anymore.”
Parsons said Parretti and Ladd, who have not actually seen each other since November, “spoke to each other in January.” Ladd himself told sources that he is not inclined to leave, assuring them that the current situation “will resolve itself within a week,” and a WB spokesman denied that the studio had had discussions with Ladd or any of his staff.
In the meantime, plans to open “Delirious” remain scuttled, as do solid plans for the studio’s next two feature releases, director Ridley Scott’s “Thelma And Louise” – a Ladd favorite, and said to be getting great notices on the early screening circuit – and Mel Brooks’ “Life Stinks.”
The future of other coming Pathe product, including titles “Man In The Moon,” “Shattered,” “CrissCross,” “Liebestraum” and “Fires Within,” is similarly unclear. As to the future for “Delirious,” Pathe sources will only say that the picture will be held until it can be released properly. That will require either patience or cash: Several Pathe vendors have refused to take any more business unless they are paid in cash or paid for previous billings.
And it may require another studio. Sources say that late last week Ladd was suggesting to the creative talent behind “Delirious” that they begin looking for “someone else to put up p& a costs and get the movie released someplace else.” That someplace else could turn out to be Warner Bros., which has worldwide homevideo rights to all MGM/UA and Pathe product for the next decade.
None of this makes Ladd’s job any easier.
“If you owe Dustin Hoffman money for ‘Rain Man’ and you don’t pay him, and if you don’t have enough advertising money to even open your movie, you become the last port in town,” one top producer says. “Does anybody really want to go [ to Pathe] now with a project? No. Nobody does.”
Sources say, however, that the cash crunch has not and will not affect current productions. According to Parsons and others, production monies have not been cut off. The spokesman adds, “The productions are all still being funded, and the whole marketing situation will be resolved, and soon.”
(While the Pathe combine has no productions underway, “Harley Davidson And The Motorcycle Man” is in postproduction. The studio has more than a half-dozen other pictures readying for release. None of the recent Pathe releases, which include “Quigley Down Under,” “Rocky V,” “The Russia House” and “Not Without My Daughter,” have been runaway winners. All but “Rocky V” remain tens of millions of dollars in the red.)
Three of the studio’s most dependable franchises, meanwhile, have been weakened substantially in the past month. The fifth installment of the Rocky series opened to clamorously bad reviews and audience indifference, and it petered out at $40 million. And both the Pink Panther and James Bond series are enmeshed in lawsuits.
Bond producing company Danjaq has sued, contending that the studio has entered into rights licensing agreements at fire-sale prices and used the money to purchase the studio rather than pay fair shares to producers Cubby Broccoli and others. The complaint asks damages in excess of $20 million.
And last Thursday, Panther producer Geoffrey Prods, added a $25 million lawsuit to Parretti’s troubles, contending in a 12-page complaint that “MGM-Pathe has no further rights in sequel motion pictures based on [ Blake] Edwards’ ‘Pink Panther’ property.” The suit alleges that MGM-Pathe had agreed to make Panther sequel, or to allow Geoffrey to go elsewhere for financing, and then reneged on both promises. It states that the studio “is currently in perilous financial condition [ and as a result] has refused to finance a sequel film.”
There also is increasing calm following alarming reports that former MGM/UA owner Kirk Kerkorian, under the aegis of his Tracinda Corp., was purchasing company stocks or bonds. In fact, according to Kerkorian representatives, “neither Kirk nor Tracinda are buying any of the junk bonds and have no intention of doing so. Over the last three or four months, Lincy Foundation, which is a tax-exempt charitable organization set up by Kirk, have purchased about $5 million of the junk bonds for investment purposes for their portfolio. They have no plan to purchase more than the $5 million.”
The total dollar value of the junk bonds, at the time of the company’s sale, was put at $400 million, although analysts and traders put their value now at about one-third that.
MGM’s troubles have inspired humorous musings on Parretti’s long-rumored but never-substantiated connections to the Italian Mafia.
“This is the strongest indication we’ve had that [ Parretti] is a legitimate businessman,” one MGM/UA source joked. “I mean, since when does the Mafia have a cash flow problem?” There is even blacker humor available in Parretti’s schedule for the week: His company is crumbling around him just as he is poised like a debutante for his official Hollywood coming-out party.
The Beverly Hilton event, to be held as a fundraiser for the National Council on the Aging, is scheduled for this Thursday at the Beverly Hilton Hotel. Seated at Parretti’s table will be Lee Iacocca and Sophia Loren.
The room will be filled with industry heavies, and many of the tables, which start at $1,000 and rise to $10,000, have been purchased by the very vendors who insist on doing cash-only business with the studio or who have refused to do business with it at all. John Roth, of West Coast Video Duplicating, a company that recently has been holding lots of unpaid Parretti paper, is even listed as a member of the dinner committee.
Blame for the current troubles is being laid alternately at Parretti’s feet, or at his bankers’.
“These people [ Parretti and his associates] apparently don’t understand what it takes to run a movie studio and clearly don’t know how much money it costs to open a film,” a Pathe source says.
“[ Pathe] has no cash because their banker is sucking it out of them,” a banking source says. “They’ve turned the tap off and they’re not turning it back on, which makes no sense. The entity that would be hurt worst if the company goes down is Credit Lyonnais.”
The banking concern has invested an estimated $900 million in Pathe and to Pathe-related companies Comfinance S.A., Interpart S.A., Melia Intl. N.V. and Sasea. While according to some documents Pathe was to begin paying back an estimated $180 million in interest at the end of 1991, one source insists that Credit Lyonnais demanded over $60 million at the end of 1990. There were reports late last week that the company had decided to extend the debt, but specifics could not be obtained.
“There are still several companies out there that recognize the value of this company,” one investment banker says, dismissing rumors of a voluntary or involuntary Chapter 11 bankruptcy. “They are interested in investing in a company that they know will grow and can still earn revenues from libraries that it already owns.”
The source noted that less than half of the approximately $1 billion value of the libraries has been sold away in the form of rights. The Japanese tv market, which never has been licensed to broadcast the James Bond series, for example, remains untapped.
“If you’re Warner Bros, and you have a ‘Bonfire,’ or if you’re Universal and you have a ‘Havana,’ you take your losses and you move on,” a rival studio head says. “You have money from other activities to cover your losses – money from tv, from foreign, from homevideo, from your other movies.
“But if all you have for cash flow is theatrical, and you have to rely on movies that don’t perform to replenish your cash, you don’t have a chance,” he said. “It’s what killed a lot of companies, and what’s killing Orion now…. They don’t own enough of their movies to make it worthwhile. It’s expensive to keep the machinery going. In the current climate, you’ve got to own it all.”
Deborah Young In Rome and Judy Brennan In Los Angeles Also Contributed To This Report.