Qintex Entertainment Inc., an affiliate of the Australian firm facing a $50-million breach-of-contract and fraud lawsuit in the wake of its failed attempt to buy MGM-UA Communications Co., filed for protection under Chapter 11 of the Federal Bankruptcy Code, the company announced today.
The company also sought Chapter 11 protection Thursday for two of its subsidiaries, Hal Roach Studios Inc. and Qintex Productions Inc., the company announced in a statement released this morning.
Company spokesman Daniel Saks, reached at home by telephone, said the bankruptcy filing was unrelated to Qintex Australia Ltd.'s failed $1.5-billion MGM-UA acquisition, blaming it instead on the collapse of a separate Qintex Entertainment $5.9-million loan deal.
"Qintex Entertainment was not a party to the merger with MGM-UA, and it was not named in the subsequent lawsuit," he said.
The company also announced that David Evans has resigned as president and chief executive officer of Qintex Entertainment but said he will continue as a full-time consultant until a successor can be named.
MGM-UA terminated the $1.5-billion acquisition by Qintex Australia, which holds 43% of Qintex Entertainment's stock, earlier this month after the company failed to provide MGM-UA with a required $50-million letter of credit.
MGM-UA sued Qintex Australia for alleged breach of contract and fraud, seeking $50 million in damages. The lawsuit is pending in Los Angeles.
Qintex Entertainment and Qintex Australia were working with a lender to secure more than $5.9 million needed for a distribution agreement with Hal Roach Studios, Saks said.
But the lender, which Saks refused to identify, declined to provide the funds, prompting the bankruptcy filing in Los Angeles, Saks said.
The $5,945,000 loan was for "a guarantee payment against MCA's share of a distribution agreement with Hal Roach Studios," the spokesman said.
"It was a longstanding agreement with Hal Roach Studios," established before the MGM-UA acquisition failed, he said, declining to elaborate further on the deal.
The bankruptcy petition was authorized at a meeting of Qintex Entertainment's Board of Directors on Wednesday to offset the loss of corporate assets, to protect company shareholders and to deal with creditor's claims, the company said in a prepared statement.
The company also announced that Roger Kimmel, an independent director of Qintex Entertainment's nine-member board, resigned because he was no longer needed after the failure of the MGM-UA acquisition.
Officials said the company will continue to operate during Chapter 11 proceedings.