The battle over financially troubled MGM-Pathe Communications Co. intensified Monday as Giancarlo Parretti accused Credit Lyonnais Bank Nederland of sabotaging his efforts to run the studio, and Credit Lyonnais announced plans to broaden its control over Parretti's empire.
Parretti's charges are contained in a complaint filed by his holding company, Pathe Communications Corp., with a Delaware court presiding over the dispute. The former MGM chairman maintains that Credit Lyonnais, his chief backer in the $1.4-billion deal, had no cause to seize control of the studio.
Parretti asserts that the state-owned French bank was "fully aware" of his management plans when he acquired MGM last November but that it later turned against him because government officials were angered by his acquisition of Pathe Cinema, the venerable French film company. The bank even forced him to conceal the extent of its involvement in the MGM deal, Parretti said.
Further problems developed when Credit Lyonnais learned that about $18.6 million loaned to MGM was subordinated to its publicly held bonds due to "an apparent blunder," according to Parretti. He said the bank subsequently came close to forcing MGM, which has been plagued by financial problems since Parretti acquired it, into bankruptcy by "systematically" delaying credit line funding.
Credit Lyonnais fired Parretti from the MGM board in June, just two months after he was removed from the chairmanship. The bank accused Parretti at that time of seeking to have himself reinstated as studio chief at an illegally constituted board meeting. Parretti, in his court response, said he asked to be designated as chairman of the meeting, not the studio.
Parretti asked the court to reinstate his management team. But Credit Lyonnais indicated that it plans to exert even greater control over Parretti's affairs. The bank, which already has taken control over MGM, disclosed that it also intends to assume voting control over Pathe Communications Corp., MGM's parent company.
Credit Lyonnais said the move is designed to "provide further support for the new management of MGM, to stop interference by (Pathe representatives) with various MGM subsidiaries and to prevent continued financial waste by Pathe."
Parretti controls 98.5% of Pathe. But an agreement between Parretti and Credit Lyonnais gives the bank the option, under certain conditions, to exercise voting rights over the 73% of Pathe's holdings that were put up as collateral against loans made to Parretti interests.
Credit Lyonnais reportedly intends to argue in court that those conditions, which include gross mismanagement, have been met. Credit Lyonnais confirmed last week that its exposure to companies in which Parretti is "directly or indirectly" a majority shareholder totals $888 million. Some analysts have placed the figure as high as $1.5 billion if loans to Parretti associates are included.
Credit Lyonnais won a small victory against Parretti on Monday, when a Paris court ousted Parretti's management team from MGM-Pathe's French subsidiary. The court, citing management irregularities, placed control of the company in the hands of an administrator.
Pathe, in a prepared statement, called the bank's moves illegal and said it would seek a restraining order. Credit Lyonnais declined comment on Parretti's accusations.