One of film legend Charlie Chaplin's best-known movies is "The Gold Rush." For Carolco Pictures, whose epic film biography of Chaplin opens today, business lately has been anything but a gold rush. In fact, until this week there was little gold left.
But in what amounts to yet another Hollywood bailout by deep-pocketed investors, Carolco on Thursday said it expects to receive a $120-million infusion from three foreign partners, who will control more than two-thirds of Carolco, and the Metro Goldwyn Mayer studio.
The move resuscitates the flamboyant and controversial film company, which has been responsible for some of the top-grossing films in recent years. For months Carolco has teetered near bankruptcy, plagued by spending run amok. Other studios frequently blamed Carolco for inflating salaries paid directors, writers and stars.
The new funds should allow Carolco chief Mario F. Kassar to jump-start the studio's film operations and exploit his touch at putting together the "event" pictures Carolco is known for.
Recent Carolco hits included Arnold Schwarzenegger's "Terminator 2: Judgment Day" and the Michael Douglas/Sharon Stone thriller "Basic Instinct."
Despite Carolco's recent financial troubles, Kassar is said to still enjoy good relations with major stars and directors. One upcoming film is "Cliffhanger," an action picture starring Sylvester Stallone scheduled for release in May.
"They are effectively investing with the confidence that Mario Kassar can continue making the kind of successful pictures he has in the past," one source involved in the negotiations said.
The deal appears to also be a boost for Metro Goldwyn Mayer, which has been owned since last year by the French bank Credit Lyonnais after the bank foreclosed on Italian financier Giancarlo Parretti.
MGM, which will own 16% of Carolco through preferred stock it gains, receives rights in 1994 to distribute four to six major Carolco films a year. Sony Pictures' TriStar unit now distributes Carolco's films, including "Chaplin."
The deal helps MGM in its efforts to revive itself by giving the studio a steady stream of major pictures to distribute.
Speculation in Hollywood is that the whole deal was orchestrated behind the scenes by Credit Lyonnais, which is Carolco's biggest bank lender. The bank needs to make MGM more attractive to potential suitors to recoup some of the estimated $2 billion it has sunk into MGM in loans and operating funds. Bank laws require Credit Lyonnais to sell the studio by 1996.
But MGM sources insist that wasn't the case. They say MGM executives first approached Carolco without telling Credit Lyonnais. MGM and Carolco executives were not available for comment Thursday, representatives of both companies said.
The deal calls for Carolco's three foreign partners--Japan's Pioneer LDCA Inc., France's Le Studio Canal Plus and Italy's RCS Video International Services--to put in another $60 million and the $50 million in film co-production money. Carolco also plans to offer new notes to holders of its high-cost debt, and has agreed to pay more than $30 million in residuals owed actors, writers and directors.
The three partners will own about 68% of Carolco. As part of the restructuring, the three will gain a controlling interest in Van Nuys video distributor Live Entertainment. In exchange for all of Carolco's Live shares, part of an earlier $32.2-million loan the partners made to Carolco will be forgiven.
One big change expected is that more attention will be paid to Carolco's overhead. Carolco spent millions on talent and perks in the 1980s, including huge chartered yachts for the annual Cannes Film Festival in France. One recent sign of cost controls came when the company gave up its jet.
"I would think the partners will exercise more control," said Russ Belinsky, an investment banker with Chanin & Co., an investment banking firm that has worked with both Hollywood guilds and bondholders in the Carolco deal.
Carolco's announcement cautioned that there is no guarantee the restructuring will be completed--although sources said they doubt the deal will unravel. Several major conditions must be met, including regulatory approvals and the negotiation of a new employment agreement for Kassar that is expected to be a highly lucrative deal.
Carolco is the latest Hollywood bailout. Orion Pictures has emerged from bankruptcy proceedings, thanks to personal guarantees on loans from its biggest investor, billionaire John Kluge. And Credit Lyonnais is supporting MGM at a cost some observers estimate at $400 million a year.
Now that the restructuring has been negotiated, Carolco can turn its attention to "Chaplin," which is directed by "Gandhi" Oscar winner Richard Attenborough and distributed by Sony Pictures' TriStar unit. Reaction so far is mixed. Robert Downey Jr.'s performance as Chaplin has been widely praised, but others question whether young audiences will show any interest in the comedian's life.
On top of that, the film is up against a strong slate of holiday pictures, among them Columbia's "A Few Good Men," Walt Disney's "Aladdin" and 20th Century Fox's "Home Alone 2." Another highly touted film, Fox's 'Hoffa," starring Jack Nicholson as the late Teamster boss Jimmy Hoffa, also opens today.