Turner Sues Drexel Over $10-Million Debt Purchase : Creditor: The broadcaster says Drexel should have disclosed it suffered millions of dollars in losses before the deal.

In years past, Ted Turner, the billionaire “Mouth of the South,” and Drexel Burnham Lambert Inc. were tight.

Drexel, the once powerful investment banking house, underwrote Turner Broadcasting System’s biggest deals, such as its $1.5-billion buyout of MGM/UA Entertainment Co. and the refinancing of its long-term debt. Turner, in turn, attended Drexel’s annual junk bond conferences and praised the maverick firm’s ways.

But now, according to a suit filed in U.S. District Court in Atlanta, Turner is just another one of Drexel’s litigious creditors who maintains that he’s been misled.

Turner Broadcasting has charged that Drexel committed fraud and violated state and federal securities laws by failing to disclose that it suffered millions of dollars in losses in recent months before selling Turner nearly $10 million in short-term debt.

Turner bought $4.96 million of Drexel’s promissory notes--corporate IOUs--on Jan. 24 and bought another $4.99 million of these notes on Feb. 11, only two days before Drexel’s corporate parent filed for Chapter 11 bankruptcy protection.

The notes were supposed to be paid off last Friday, but Turner said in its suit that the notes “have not and will not” be paid.

Turner also charges that Drexel failed to disclose that it had faced increasing difficulty in selling its notes throughout 1989.

Turner seeks $7 million in punitive and compensatory damages and said it will not pay back $3 million that it owes to Drexel. Drexel bought Turner Broadcasting debt shortly before its bankruptcy filing, too.

The suit said Turner’s losses were reduced to about $7 million because Drexel repurchased $3 million of the notes before the bankruptcy filing. The notes were then resold to Security Pacific National Bank.

Drexel declined to comment on the suit, and Security Pacific officials could not be reached.