Orion Pictures Is Struggling for Its Financial Life

Executives at Orion Pictures Corp. can probably relate to the scene in which the two heroes from its latest release, “Bill and Ted’s Bogus Journey,” encounter the Grim Reaper.

Orion is engaged in its own bid for survival as it works to persuade bondholders, creditors and the banking community that the ailing film company is worth more alive than dead.

Looming bank and interest obligations of more than $66 million have backed Orion into a corner. The company, always something of an anomaly in Hollywood because of its New York roots and close ties to serious filmmakers such as Woody Allen, hopes to wrap up debt restructuring discussions with bondholders within three weeks. But sources say Orion could be slapped with an involuntary bankruptcy petition before negotiations are completed.

Attorneys Stephen Chrystie and Elihu M. Berle, who earlier this year filed a similar action against MGM-Pathe Communications Co. that was settled out of court, reportedly have been contacted by several of Orion’s creditors. Chrystie and Berle declined comment but are said to be prepared to file court papers if Orion defaults on one of its major debt payments.

“It is a certainty there will be a bankruptcy if a payment is missed,” said one source.

Financial experts say it’s doubtful that Orion, whose films have racked up dozens of Academy Awards, could continue to function as a major competitor in Hollywood under bankruptcy since movie production would indefinitely be put on hold.

Orion has already fallen behind on a $1.2-million bond interest payment. Another $13-million payment is scheduled Aug. 15, and a $50-million bank loan is due Aug. 31. In addition, the company reportedly has overdue bills to business associates totaling between $30 million and $40 million.

In a recent Securities and Exchange Commission filing, Orion said its $300-million bank credit line was exhausted. At the same time, the company has enjoyed a solid run of success at the box office recently. “Dances With Wolves,” “The Silence of the Lambs,” “Mermaids” and “Bill and Ted’s Bogus Journey” together have taken in more than $350 million domestically.

That’s given some currency to Orion’s argument that the financial outlook for investors is brighter if it is allowed to continue releasing movies rather than being sold off piece by piece.

Steven Hill, an entertainment analyst with Sutro & Co., agreed that Orion’s film library is more valuable with the company alive since film packages are often sold to television and other markets on the strength of the latest releases. But he said the financial reorganization could prove too costly to be practical.

“I personally think they’ll be forced into bankruptcy,” Hill said.

The foundation of Orion’s restructuring is a plan that calls for swapping $285 million in debt, including four junk bond issues, for new debt and stock--a plan that would drastically stretch out the firm’s interest payment obligations and thus give it considerable breathing room. For every $1,000 face value of junk bonds, holders would receive $750 principal value of a non-interest-paying zero coupon bond maturing in 1998. Orion would also issue between 37 and 42 new shares of stock for each bond.

Many investors consider the restructuring plan unfair and have called on Orion majority shareholder John Kluge to ante up more cash for the ailing company, which lost $63 million last year. The bonds, which plunged in value when the restructuring plan was unveiled in May, are still trading at 30 to 40 cents on the dollar.

Orion hoped to reach an agreement by Tuesday, but bondholder attorneys have taken longer than expected to examine the company’s books. The next meeting is set Thursday. Orion executives say they expect to receive a counterproposal from bondholders soon.

Wilbur Ross of investment banker Rosthschild Inc., who represents the bondholder committee, said discussions are going well. “The tone is good,” Ross said. “There is no antagonism.”

Ronald Fein, a bondholder attorney, also confirmed that “the bondholder committee is actively working with (Orion) on a day-to-day basis,” but declined to say when talks might end.

Ross does not foresee an imminent bankruptcy filing. “If the talks are making progress, there’s no reason to file a petition,” he said. “It’s in everyone’s interest not to file.”

Orion executives are upbeat about the future, though they refuse to say how they would react to a tough bondholder counterproposal. One possibility, if liquidation is threatened, is a voluntary reorganization under bankruptcy protection. People close to Kluge say he would almost certainly opt for reorganization under those circumstances.