Orion Bondholders Want a Better Restructuring Deal


Orion Pictures Corp. bondholders, dissatisfied with a restructuring plan offered by the entertainment company, are expected to hire a representative to bargain for a better deal.

A bondholders committee has prepared a list of possible lawyers and investment bankers to represent them in talks with New York-based Orion. Company sources said a Tuesday deadline for responding to the restructuring probably will be extended to allow time for the discussions.

"This is a commonplace occurrence with these types of offers," one Orion executive said. "Everyone postures at first, then they get down to trying to make the deal work."

The New York investment banking firm Wertheim Schroder & Co. has been named as one possible bondholder representative. Several prominent bankruptcy lawyers are also being considered.

One bond fund manager said Orion must "sweeten" its original offer. "We are in the driver's seat, as much as we can be," he said. "It benefits everyone to come to some conclusion."

Orion's standing offer, designed to eliminate nearly $400 million in interest payments by 1998, calls for exchanging $285 million in debt for new debt and stock. An Orion junk bond with a face value of $1,000 would be traded for a zero coupon (non-interest-paying) bond to be worth $750 in 1998, plus 37 to 42 shares of common stock.

When the plan was announced in May, Orion said it was part of a comprehensive restructuring designed to "dramatically strengthen" its balance sheet. But investors were underwhelmed. The company's stock, trading in the $9 range before the plan was unveiled, has plunged to around $4. It closed at $4.25 Thursday, down 12.5 cents.

Meanwhile, the company's junk bonds have tumbled as well. Most of the bonds were trading for $500 to $600 per $1,000 face value before the restructuring. They now trade for $290 to $440.

Financial analysts say Orion's prospects are bleak if the plan falls through. John W. Kluge, whose Metromedia Co. owns 68% of Orion, has indicated that he will not invest any more money in the troubled company. And Orion's ability to compete against other Hollywood studios for top talent would be severely undercut if it entered into bankruptcy.

"It's probably premature to announce their demise," said Jeffrey Logsdon, an analyst with Seidler Amdec Securities in Los Angeles. "But it's not too early to join the throng of others saying there are some real financial hurdles here. . . . The bondholders have to decide if Orion is worth more to them dead or alive."

Kemper Securities, a major bondholder that is said to be leading the discussions, declined comment on its plans. One well-known Los Angeles entertainment/bankruptcy firm reportedly declined to represent the group, however, because of the possibility of competing interests among bondholders.

Sources said talks could be complicated by the fact that the restructuring plan affects four different bond issues maturing between 1994 and 1999. One financial expert said it could take as long as three months to evaluate the company's holdings and render a fairness opinion.

Orion is operating under a crushing debt, despite the recent success of "Dances With Wolves" and "Silence of the Lambs," and the sale of some properties to other studios.

The company lost $62.9 million last year on revenue of $584 million. It has a $50-million payment due Aug. 31 on a $300-million bank credit agreement, and a $16.9-million interest payment on its debentures.

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