-302-
to * * * [working capital agreement], $298,835,633.58, or 79% of
the loan, was repaid. As late as mid-1996, and for all periods
prior thereto, there was a clear expectation that the Holdings-
CLIS Debt would be paid.”
Shearman & Sterling concluded that the $79 million
receivable represented a valid debt interest when issued because,
inter alia, the parties were unrelated, the terms of the debt
were largely based on terms negotiated at arm’s length when the
parties were unrelated, and MGM Group Holdings had the capacity
to pay at least some of the debt from its assets. Shearman &
Sterling did not analyze whether MGM Group Holdings’ assumption
of the $79 million receivable represented a new debt and whether
that assumption established a valid debtor-creditor relationship.
Insofar as we have concluded that the $79 million represented new
debt, Shearman & Sterling’s conclusions are erroneous. Credit
Lyonnais, the creditor with respect to the $79 million
receivable, was the parent company of CLIS. CLIS, in turn, was
the sole shareholder of MGM Group Holdings when that entity
assumed New MGM’s $79 million debt obligation to Credit Lyonnais.
MGM Group Holdings, in turn, was the sole shareholder of New MGM.
All the parties were related, with Credit Lyonnais pulling the
strings. The assumption of the $79 million debt was not
negotiated at arm’s length. After New MGM was sold, MGM Group
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