Taxpayers Are at Risk if Weintraub Fails : Entertainment: Two thrift failures have left Uncle Sam with $22.5 million in bonds issued by Weintraub Entertainment Group.

Taxpayers most likely will be the big losers if film mogul Jerry Weintraub doesn’t shore up a faltering attempt to restructure his troubled entertainment company.

Two savings and loan failures have left the Resolution Trust Corp., a government agency that manages failed thrifts, holding $22.5 million of the $76 million in junk bonds issued by Weintraub Entertainment Group in 1987, public records show. The government could add $12 million more to that total should it seize two other troubled thrifts.

The government took control of the Weintraub bonds it owns when regulators seized CenTrust Bank in Miami and Imperial Savings in San Diego earlier this year. CenTrust owned $15 million of the bonds. Imperial owned $7.5 million.

Weintraub Entertainment President Kenneth Kleinberg on Thursday strongly denied a flurry of rumors that the company was on the verge of liquidation. “Any talk of that sort is unfounded. There’s no truth to it whatsoever,” he said.

Several sources said the company’s banks, Bank of America and Credit Lyonnais, had set an Aug. 31 deadline for resolution of the company’s financial problems. A spokeswoman for Bank of America declined to comment.

Kleinberg said only: “We’ve had deadlines with various kinds of creditors. That’s never been a problem for us in the past, and I don’t expect it to be a problem now.”

According to Kleinberg, Weintraub’s banks in January agreed to soften terms of their lending agreements while the company sought an equity partner or sold assets. He said the company has less than $88 million in bank debt but declined to discuss the restructuring attempts in detail.

Several individuals said Salomon Bros., the New York investment banking firm, entertained bids for Weintraub’s film library and other assets earlier this year, and came up with offers that topped out in the $80-million range.

The company in 1987 paid Cannon Group Inc. about $85 million for a 2,000-title movie and TV library that had previously been owned by Thorn-EMI Screen Entertainment. The library includes older movie titles such as the original “The Lord of the Flies” and “The Lavender Hill Mob,” as well as “My Stepmother Is an Alien” and other movies produced by Weintraub Entertainment.

Because the bank debt is senior to the bonds, bondholders would get nothing for their investment if the company were liquidated at that price. A liquidation presumably would also cost Jerry Weintraub the $11.5 million he paid for his controlling interest in Weintraub Entertainment stock.

Weintraub, the company’s founder and principal owner, is a friend and political supporter of President Bush.

The Centrust and Imperial failures alone appear to make the RTC the biggest owner of Weintraub’s junk bonds. But the agency could inherit $12 million more should it seize Columbia Savings & Loan in Beverly Hills and FarWest Savings in Newport Beach. Taxpayers would then own nearly half of Weintraub’s bonds.

A source familiar with Columbia’s holdings said the thrift owns $7 million in the bonds. Other sources said FarWest’s American Capital Fidelity Corp. subsidiary owns $5 million that it bought in the 1987 offering.

Columbia, which is insolvent, has agreed to sell its entire portfolio of junk bonds for $3 billion to a Canadian-led partnership, although the controversial deal must still be approved by federal and state regulators. Last week, regulators rejected FarWest’s plan to restore itself to financial health, putting it in danger of being seized unless its owners, the wealthy Belzberg family of Canada, inject more money into it.

Weintraub Entertainment stopped paying interest on the bonds last January and has since been struggling to restructure its debt. The company was founded with $400 million in backing from Columbia Pictures, Cineplex-Odeon Corp. and other major investors, but it quickly faltered when a succession of films flopped at the box office.

Kleinberg denied rumors that Weintraub Entertainment would close its West Los Angeles headquarters and that Jerry Weintraub would move to Warner Bros. under a movie production agreement as early as next week. But Kleinberg said Weintraub Entertainment has had discussions with various companies about a distribution deal that would presumably replace its current distribution arrangement with Columbia.