Bank in Reluctant Role as Film Industry Mogul : Movies: Credit Lyonnais has been key backer of independent studios. Now their struggles are its own.

The name Credit Lyonnais frequently showed up in the 1980s as credits rolled at the end of films.

Once, a lending officer of the French government-owned bank was thanked by a producer accepting the Academy Award for best picture.

Bank officers could approve film scripts and casting decisions on pictures, a rare right for a lender.

For Credit Lyonnais, this was life as Hollywood’s premier lender to independent movie producers, financing fledgling filmmakers whom mainstream bankers would not touch. The bank aggressively financed unknown producers who took its money and made big hits such as the “Rambo” films and the Oscar-winning “Platoon.” Without the bank, many in Hollywood agree, much of the independent film business that thrived in the 1980s would not have happened.

Now, the bank’s Hollywood connections are coming back to haunt it. Many of the independent studios that it bankrolled over the past 10 years are in shambles, either struggling to survive or out of business. In an unprecedented development, Credit Lyonnais finds itself in the position of being Hollywood’s newest mogul--by no choice of its own.

The bank is now running the financially ailing MGM-Pathe studio after ousting flamboyant Italian financier Giancarlo Parretti in April. Just weeks before, Parretti was proclaimed “the new king of Hollywood” by “Lifestyles of the Rich and Famous” host Robin Leach.

To date, Credit Lyonnais has sunk about $1 billion into MGM-Pathe in a series of loans that has baffled investment bankers, Hollywood executives and even members of Credit Lyonnais’ staff.

The bizarre twists continue almost daily in a story that one day may make a marketable script. Credit Lyonnais on Monday kicked Parretti, his wife and a longtime business associate off MGM-Pathe’s board of directors after what it contends was a failed coup d’etat to regain control of the studio. On Tuesday, a Delaware judge issued a court order upholding the action, which Parretti is fighting in court with a counterclaim.

Credit Lyonnais’ experiences have caused it to severely tighten its lending in Hollywood, and fears of a full-scale retreat are unnerving independent producers, who have been responsible for some of the biggest films of recent years. Credit Lyonnais provided seed money to such firms as Castle Rock Entertainment, which produced such films as “City Slickers” and “When Harry Met Sally.”

Key Hollywood Role

“They have led the field in the banking community in terms of being supportive of the independents,” said Castle Rock President Alan Horn. “If they should leave or reduce their commitment . . . it would deal a severe blow to the entertainment industry. Because we have not seen any American bank or group of banks that’s ready or willing to take their place.”

But Credit Lyonnais’ Hollywood lending is causing a firestorm of trouble in France. French and Dutch officials are calling for investigations into Credit Lyonnais’ ties to Parretti. Opponents of France’s socialist-led government are hammering away at the issue by linking the bank’s involvement with Parretti to his ties to Italian socialists.

MGM-Pathe sources confirm that Credit Lyonnais is seeking a buyer for the company. The bank reportedly is exploring every possible business combination, including one in which it would retain a minority stake in MGM-Pathe. “They want someone who sees the possibilities in this company,” one source said. “They have no intention of staying in control.”

Whether Credit Lyonnais can get rid of MGM is another matter. One investment banker with ties to Credit Lyonnais describes MGM as “a company that has died a thousand deaths on the operating table.”

Credit Lyonnais officials could not be reached for comment Tuesday. In earlier statements, the bank said it was anxious to cut its ties to MGM. “We are trying to sort it out and put everything in order,” said one bank officer who requested anonymity.

Credit Lyonnais said its involvement with Parretti stems from its 1981 acquisition of the Dutch commercial bank Slavenburg, with which he had a standing relationship.

“Parretti was one of their best clients,” the Credit Lyonnais officer said. “We didn’t go out and look for him. He was already there.”

Although little known in the United States, Credit Lyonnais is a huge institution, ranking among the world’s 20 largest financial institutions and bigger than any U.S. bank. Its hands are in numerous deals--one of its units is favored to assume the wreckage of Executive Life, the failed Los Angeles life insurer, in a deal being arranged by state insurance regulators.

Although the bank has scaled back its involvement with Hollywood, its tracks remain everywhere. It is currently listed in the credits of Hollywood’s two top movies--”Robin Hood: Prince of Thieves” and “City Slickers.”

The bank’s Hollywood connection stems to the early 1980s through Frans J. Afman, who came to Credit Lyonnais when it bought Slavenburg. A Dutch lawyer, Afman was known at the time as “the banker who reads Variety.” From the gritty Dutch port of Rotterdam, money began flowing from Credit Lyonnais to Hollywood in Afman-arranged deals.

A tall, charming Dutchman with a bald pate, Afman discovered the entertainment business in the 1970s when he was introduced to producer Dino de Laurentiis by Charles Bluhdorn, the late chairman of Paramount Communications’ predecessor, Gulf & Western.

De Laurentiis became a mentor of sorts to Afman, who took enthusiastically to Hollywood. He would frequently breeze into town, presiding from a table at Le Dome. He was a regular at Spago and rented a summer home in Malibu. According to one acquaintance, Afman was important enough that people watched closely to see “who’s having lunch with Frans.”

Afman became a regular at Cannes and other film festivals, where producers and executives sought him out for money. Credit Lyonnais developed a reputation as the bank the independents could count on, the “happy checkbook,” as one former executive put it.

Independents appreciated it, to say the least. Castle Rock’s Horn said Credit Lyonnais was the only bank willing to support the company in its early days.

“They have been consistent supporters of us and have been there for us through every phase of our embryonic development,” Horn said. “They stood up for Castle Rock when no one else wanted to. We spoke to several U.S. banks. No one would write us a check. They did.”

But critics said that its standards were loose. Several lawyers who dealt with Credit Lyonnais said the bank often required little documentation on loans, and that collateral the bank received was sometimes of questionable value, usually something involving foreign film rights.

Loan Trouble

“You often didn’t realize how collateralized the loans were until the picture performed or didn’t perform,” said one lawyer who worked closely with Credit Lyonnais.

One former executive said the bank made huge amounts of money financing independent producers in the mid-1980s, but ran into trouble when it began to do more corporate-type loans to entertainment firms. It provided $50 million to Weintraub Entertainment, now in bankruptcy court proceedings. Another $100 million went to now-struggling independent Nelson Entertainment. Other Credit Lyonnais clients have included Vestron, which filed for bankruptcy protection last year, and debt-laden Carolco Pictures.

Credit Lyonnais already was trimming back its entertainment lending--partly under pressure from French banking regulators--when Parretti came along. Parretti acquired MGM from financier Kirk Kerkorian for $1.4 billion last November in a deal made possible by Credit Lyonnais money.

Metro-Goldwyn-Mayer is still best known as the studio with the roaring lion logo that preceded such classic films as “The Wizard of Oz” and “Gone With the Wind.” But latter-day owners stripped MGM of most of its major assets, including its lot, and in recent years it has been one of Hollywood’s least productive studios. Last year, MGM captured only 2.8% of the overall domestic box office.

Parretti, the flamboyant Italian financier who controls a slew of European-based companies, bragged of his desire to create an international entertainment empire. A live lion was brought to his office on the day the MGM deal was completed. But within months, MGM had fallen behind on its bills and was unable to release a string of completed films.

In March, creditors moved to force the company into liquidation. The case was settled out of court, but by then Credit Lyonnais had assumed control of MGM and forced Parretti out as chief executive. Now, says one former executive, the joke at the bank is that “MGM is Credit Lyonnais’ in-house film company.”

Some Credit Lyonnais executives are still puzzled about why the deal was done. No other banker or investment house wanted to touch it.

“Every investment banker who looked at the MGM deal said there is no deal here because it doesn’t make sense,” said one who did review it.

Concerns were dismissed by bank executives in France. Afman, who left the bank full time in 1988 but remained a consultant until last year, differed with Credit Lyonnais for years over its involvement with Parretti, but denies now that he left the bank for that reason.

One Credit Lyonnais banker conceded that constant questions about financial ties to Parretti by French politician Francois d’Aubert and others have caused the bank embarrassment and forced its hand. “There are a lot of people lobbying against Parretti,” the banker said. “There has been an unleashing of passions against him.”

In December, D’Aubert requested that an investigative committee look into Parretti. When that failed, he continued to push for an official inquiry. Nothing has come of his efforts so far, but D’Aubert says the bank must end its relationship with Parretti. “Credit Lyonnais is going down a dangerous path,” he said recently. “They are chasing bad money with good money.”

Staff writer Rone Tempest in Paris contributed to this story.