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the valuable MGM film library. Any chance of recouping the loans
and advances evaporated, however, when the highest bid in the New
MGM sale was $1.3 billion. New MGM was still insolvent; it still
owed approximately $79 million to Credit Lyonnais. Generale Bank
would recover nothing on the approximately $1 billion in debt
obligations that MGM Group Holdings owed Generale Bank. Stripped
of the potential value in its stock in the MGM operating company,
MGM Group Holdings was left hopelessly insolvent. Without its
MGM stock and the valuable MGM film library, MGM Group Holdings
was essentially an empty shell, devoid of any assets of value.173
The only assets in MGM Group Holdings at this time were the
Carolco securities and the NOLs. Carolco had been in bankruptcy
for nearly a year; a first plan of reorganization filed on
September 13, 1996, reflected that holders of the Carolco
preferred stock and subordinated notes would receive nothing on
Carolco’s imminent liquidation. MGM Group Holdings had NOLs
172(...continued)
a range of values of approximately $1.6 to $2.0 billion for MGM.
173 SMHC’s draft financial statements for the period ended
Dec. 10, 1996, paint a very bleak picture of SMHC’s history and
future. The financial statements report that SMHC (i) had
experienced recurring operating losses, (ii) had an accumulated
deficit, and (iii) generated insufficient cashflow to fund its
debt servicing requirements. The financial statements also show
that SMHC had debt held by affiliates of Credit Lyonnais which
was due and payable July 15, 1997, and which was not expected to
be extended and that SMHC’s sole shareholder, CLIS, had not
committed to providing further funding of SMHC’s debt
obligations.
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