With Frank Mancuso in, chairman Alan Ladd Jr. and possibly his team heading for the exit, and a massive $ 400 million line of credit from Credit Lyonnais in the offing, MGM/UA seems poised to rise from the ashes once again.
In a seismic management shift sealed at a Sunday board meeting, former Paramount topper Mancuso, 60, will be chairman and CEO of separate Metro-Goldwyn-Mayer and United Artists production shingles, CL announced. Highly placed sources said Mancuso signed a five-year contract.
“I am honored to be a part of this historic institution that has meant so much to our industry for so many years,” Mancuso said in a statement that was also distributed to MGM employees. “In coming weeks, I look forward to meeting each of you personally to share views on our future together.”
Mancuso could not be reached for comment on what this future might entail for current MGM staff. Some expect him to start headhunting fortop spots starting today.
Here’s what the bank is willing to put up to turn around the indebted studio:
- Extend the revolving credit line for MGM/UA with $ 400 million that would also cover a rejuvenated TV production program. This includes a $ 190 million credit line the bank granted MGM earlier this year.
- Have MGM /UA Inc.’s immediate corporate parent, MGM Holdings Inc., assume the $ 800 million existing bank debt, which would strengthen the studio’s equity balance sheet by that amount.
- Redeem MGM Inc.’s $ 221 million, 13% subordinated debt, partly funded by the sale of MGM theaters overseas to MGM Holdings, which sources expect to reduce interest payments by approximately $ 35 million annually.
All these moves will make the studio’s books look more attractive to the buyer MGM/UA must find before the January 1997 deadline imposed by U.S. banking laws.
“The financial initiatives we are implementing will enable MGM to go forward with a healthy balance sheet and the flexibility to pursue a full business agenda which includes the revival of the company’s valuable asset, United Artists,” said Credit Lyonnais S.A. director general Francois Gille and deputy director generral Alexis Wolkenstein, in a statement. “When these various steps are implemented, MGM will have a debt-to-equity ratio of approximately 1-to-2.”
Mancuso is an entertainment industry veteran who has been a producer since resigning as chairman of Paramount Pictures in March of 1991 (Daily Variety, March 21, 1991). Before that, he spent 22 years in distribution and marketing at the studio.
While Ladd’s name was conspicuously absent from the release, it did mention that the bank has “benefited greatly from the valuable counsel of Michael Ovitz and the Creative Artists Agency team. We look forward to continuing this most productive relationship.”
Ovitz and CAA were hired by Credit Lyonnais early this year as financial advisers helping the bank find a buyer for the studio.
It is understood an original version of Sunday’s release disclosed Ladd’s resignation. But in one of the day’s most dramatic moments, he walked into the board meeting at the Peninsula Hotel in Beverly Hills with two lawyers in tow. After some wrangling, Ladd’s name was removed from the official announcement entirely.
Although Ladd was unavailable to comment, a statement from Ladd’s attorney Alan Susman read: “In the very near future, we anticipate his position regarding this termination, admittedly made without cause, will be publicly disclosed.”
It would cost the new management a minimum of $ 5.25 million to buy Ladd out of the current contract, which runs through Dec. 31, 1994, sources noted.
The future of Ladd’s team — headed by marketing and distrib prexy Ashley Boone — is currently up in the air, since it has largely failed to attract A-list talent.
Current top slots in question include production senior VP David Ladd and senior production VPs Rebecca Pollack and Greg Foster, who also heads research for the lion. Another loyalist on the current management team is Gotham-based senior VP of production and marketing Kathie Berlin.
“I worked for Ladd for seven to eight years and I never met a human being more decent and honest and caring and who made me proud to work somewhere,” said Foster, who is shepherding MGM’s upcoming “Getting Even With Dad.”
“For those of us who have worked with Ladd, this is very upsetting, but I believe he has a very good and bright future ahead of him,” Berlin added. “If I’m unhappy, it’s because I know we won’t have him with us anymore.”
Several factors — not counting a flurry of rumors with varying substance — have contributed to slowing the studio’s road back from the abyss. Among them has been Ladd’s resistance to share power with any other co-chairman after the reportedly uneasy partnership with Dennis Stanfill, who was edged out by the bank on June 2.
Ladd has also resented any interference with the authority of his marketing team, even though the results have been grim. In the hands of more savvy experts , pundits gripe, the hugely popular “Thelma and Louise,” which grossed $ 40 million, could have clocked in nearer $ 100 million. More recent releases “Untamed Heart” and “Benny & Joon” have only made a combined $ 42 million.
The restructuring ends a puzzle of possible exec combinations that once included Warner Bros. prexy and chief operating officer Terry Semel as new UA head of production. Semel’s talks with Mancuso reportedly ended last week, with insiders suspecting he couldn’t free himself from his WB contract.