De Laurentiis Entertainment Group, which reaped about $90 million from stock and bond issues when it went public two years ago, sought protection from its creditors Tuesday under Chapter 11 of the U.S. Bankruptcy Code.
In filing for reorganization, the Beverly Hills film producer listed $199.7 million in liabilities and $163 million in assets as of July 31. Liabilities included $70.4 million of unsecured debt to more than 100 bondholders.
The voluntary move to the shelter of Bankruptcy Court came as no surprise in Hollywood, which has watched the firm struggle to stay alive after the failure of its movies to hit pay dirt. DEG has never reported a profit, and its cumulative losses totaled more than $70 million by the end of the last fiscal year in February.
Some of DEG’s releases won plaudits from critics but had disappointing box-office results, including “Blue Velvet” and “Crimes of the Heart.” DEG also produced such major duds as “Million Dollar Mystery” and “King Kong Lives.”
The company’s stock, which reached a high of $19.25 a share shortly after the firm went public in May, 1986, last traded at 37.5 cents a share Tuesday on the American Stock Exchange.
Signal Last Week
Stephen R. Greenwald, chairman and chief executive, said the company believes that its creditors, shareholders and employees “are best served by gaining the protection of the Bankruptcy Court to allow the company to continue its ongoing restructuring program.”
The move was foreshadowed last Thursday when DEG gave up its attempt to get bondholders to accept $100 principal amount of 17.5% notes and 65 shares of a new Class B stock for each $1,000 principal amount of 12.5% notes in their hands.
Dino De Laurentiis, who founded DEG when he bought Embassy Pictures in 1985, after decades of producing films privately, departed the firm’s helm last February. He still owns 61% of its 9.58 million outstanding shares.
Although he has given a proxy allowing Greenwald to vote all his shares at the board’s direction, public documents show that De Laurentiis can revoke the proxy in event of a voluntary or involuntary bankruptcy or change in control of the firm. Greenwald was head of corporate finance at DEG when the company went public.
Saddened by News
A spokesman said he knew of no present plan for Dino De Laurentiis to revoke the proxy.
The founder, who now has a production company in Los Angeles called Paradise Films, issued a statement saying he was “profoundly saddened” at the Chapter 11 filing but hoped that “the company can be revived for the benefit of the shareholders, creditors and other investors.”
DEG said the Chapter 11 filing does not include any of its subsidiaries, including its North Carolina Film Studios and a newly formed production entity, Onyx Entertainment. DEG affiliate De Laurentiis Film Partners also is not included.
The Onyx name appeared for the first time in Tuesday’s announcement. After a complaint by the owner of Vanguard Records, DEG has abandoned previously announced plans to rename itself Vanguard Entertainment.
In connection with the founder’s resignation, the company agreed to change its name and adopt a new logo no later than Sept. 15, DEG has said in filings with the Securities and Exchange Commission. No new name has been selected, spokeswoman Susan Feldon said Tuesday.
Owes $42 Million
“We have made tremendous strides in past months to stabilize the company,” Greenwald said in a prepared statement. Among these, he noted the sale of certain foreign rights to the firm’s 300-title film library, which enabled DEG to repay its $55-million revolving bank debt.
However, DEG still owes lenders some $42 million in connection with distribution deals for outside producers’ films, according to SEC documents.
The bankruptcy filing lists secured debt of $23.9 million and other liabilities of $105.4 million.
Among other things, the filing automatically stays proceedings in lawsuits against DEG. Last week, three multimillion-dollar suits were filed against the company in Los Angeles Superior Court.
Last August, DEG settled a Securities and Exchange Commission suit by submitting data to the agency. The civil suit had accused the company of failing to maintain adequate accounting records and controls after it went public.