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principal of (and interest on) the loans and advances to New MGM
under the working credit agreement. We cannot agree, however,
that MGM Group Holdings’ assumption of the $79 million receivable
was part and parcel of its 1993 guaranty.
First, under applicable State law, a guaranty is a secondary
or collateral liability, not a primary obligation. See Gen.
Phoenix Corp. v. Cabot, 89 N.E.2d 238, 243 (N.Y. 1949).176 A
guarantor’s obligation matures “when there is a default on the
separate and independent contract or agreement.” Columbia Hosp.
v. Hraska, 338 N.Y.S.2d 527, 529 (Civ. Ct. 1972); see 63 N.Y.
Jur. 2d, Guaranty & Suretyship sec. 113 (1987). Although it
appears that New MGM failed to make proper payment on the loans
and advances under the working capital agreement, there is no
indication that Credit Lyonnais ever demanded payment or treated
New MGM’s failure as a default under that agreement. More
importantly, there is no indication that Credit Lyonnais ever
called on MGM Group Holdings to make payment under its guaranty
or that the guaranty was otherwise triggered.
Second, the debt assumption and agreement fundamentally
changed the relationships of the various parties and resulted,
critically, in a new debt obligation. Cf. Banco Portugues do
176 The working capital agreement, MGM Group Holdings’
guaranty, and the debt release and assumption agreement each
recite that the terms of the agreement shall be construed in
accordance with and governed by the laws of the State of New
York.
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