Credit Lyonnais, the French state-owned bank which controls MGM and which was once the film industry’s biggest backer, is getting out of the motion picture business.
The French government March 17 revealed a multibillion-dollar rescue package for the cash-strapped bank, which announced a record net loss of around 12 billion francs ($2.4 billion) for 1994.
Central to the rescue package is the removal of $27 billion of mainly high-risk assets and loans into a separate company, Consortium de Realisation, guaranteed by the state.
Last year the bank got an injection of $980 million in cash and had $8.6 billion taken off its books.
Among the net assets and loans to have been spun off to CDR are all Credit Lyonnais’ investments in the film industry, including MGM.
A bank source said that the agenda for selling MGM, which CL must unload by May 1997, was still in place. And some sources speculate that the sale will take place a lot sooner. “We have a responsibility to sell assets at the best price we can,” said the bank source. “In the case of MGM that involves continuing with the current restructuring and waiting to see the results.”
In return for this latest government bailout, CL has agreed to “a rigorous four-year recovery plan” concentrating its future business efforts on retail commercial banking in France and Europe, wholesale banking in France and abroad and the international capital markets.
“Investments in what we consider are not our core business are in the CDR and we are looking to sell them. Logically, the film industry is not a core business, so I don’t see us continuing in it,” said the bank source.
Independent of the CDR, CL topper Jean Peyrelevade has agreed to part company with a further $20 billion in assets during the four-year period.
The bank has already started selling some assets, including the MGM cinema circuit in the United Kingdom, Denmark and the Netherlands. The bank, along with advisers S.G. Warburg, is expected draw up a short list of buyers this week. Interested parties include the existing MGM circuit management in partnership with Carlton, Goldman Sachs and Polygram. Warner, Sony, Chargeurs, National Amusements, UGC and Golden Village are also in the running.
Both the bank management and the French government are now hoping that the worst of the Credit Lyonnais disaster is behind them. Prime Minister Edouard Balladur has called for those responsible for the financial catastrophe to be found and punished. Three ex-employees have already been taken into custody on suspicion of fraud.