Orion Files for Bankruptcy Protection
Orion Pictures Corp., the financially troubled Hollywood studio that produced such acclaimed movies as “Dances With Wolves” and “The Silence of the Lambs,” filed for Chapter 11 protection Wednesday in New York Bankruptcy Court.
Known for backing talented filmmakers and giving them creative freedom, Orion is one of the last independent studios remaining from the 1980s boom in such production companies.
Familiar names such as Weintraub Entertainment Group, DeLaurentiis Entertainment Group and Cannon Films have gone belly up or had their remains swallowed by the major studios. Earlier this year, creditors tried to force MGM/Pathe Communications Co. into bankruptcy, but a court approved a rescue plan.
The studio’s bankruptcy filing followed the collapse Tuesday of negotiations with bondholders over a proposed bailout plan.
Although Orion said it plans to reorganize and emerge from bankruptcy protection, analysts doubted that the studio could financially recover and attract top Hollywood talent.
A company, however, may emerge as a buyer for Orion’s library and film development and production list--a roster that includes a new Woody Allen film and the third installment in the “Robo-Cop” series.
One knowledgeable source said that in recent weeks Metromedia Co., which owns 68% of Orion, has talked with at least four potential buyers, including Polygram NV, the London-based entertainment giant that is re-establishing a presence in Hollywood, and Viacom, the New York-based owner of MTV.
The source said that Orion’s bondholders supported the discussions, but that the talks snagged on Metromedia owner John W. Kluge’s reluctance to remain a minority shareholder.
Orion management and the bondholders blamed each other Wednesday for provoking the Chapter 11 filing. Orion spokesman Michael Sitrick said the studio filed for protection in order to avoid an involuntary petition.
But Wilbur Ross, a Rothschild Inc. investment banker who is the financial adviser for the bondholders--who hold $285 million in Orion notes--saw things differently. “Orion’s decision to file a voluntary petition terminated the discussions,” he said.
Analysts said Orion is likely to remain in limbo, shunned by the Hollywood elite who are needed to develop and produce hit films.
“A producer is less likely to take a project to a company where it can be tied up in massive amounts of bankruptcy litigation,” said Jeffrey Logsden, an entertainment analyst with Seidler Amdec Securities in Los Angeles. Indeed, production had ceased before Wednesday’s court filing.
The Orion spokesman, however, said films already completed would be brought to the screen. “Nothing has happened to date which requires an alteration of the release schedule,” the spokesman said.
Last month Orion unfurled an ambitious 12-picture release schedule, including Allen’s “Shadow and Fog” and a Michelle Pfeiffer vehicle, “Love Fields.” The movies cannot be distributed, however, without a final agreement by the bondholders to swap their debt for 70% of Orion’s stock.
Wall Street saw only gloom in the court filing, knocking down the stock $1 a share to 87 1/2 cents, an all-time low. A year ago, a share traded for about $15 on the New York Stock Exchange.
“They should just shut down the operation and liquidate the company,” said Lisbeth Barron, a vice president of the brokerage house S.G. Warburg & Co. “It’s a shame, but if they don’t do that, then the ongoing productions will just drain off the value from whatever assets are left.”
Despite recent box-office hits--"Dances With Wolves,” last year’s winner of the Oscar for Best Picture, earned more than $184 million domestically, and “The Silence of the Lambs” has earned almost $131 million--Orion has been in financial turmoil for more than a year.
The release of those films followed a string of costly flops. The studio last summer missed interest payments of $17.4 million on its debt, and it was unable to pay $50 million of principal due Aug. 31.
In its Chapter 11 petition, Orion listed total assets of $1.048 billion and total liabilities of $973 million.
Orion’s financial condition had become so precarious this year that Allen ended his long association with the studio, accepting an offer to make his next film at TriStar Pictures. Orion also shut its TV division last spring, selling its projects to other studios.
In a desperate bid to raise cash, Orion sold Paramount the rights to “The Addams Family"--one of the Christmas season’s biggest box-office hits with a domestic gross of more than $67 million in three weeks.
Orion was founded in 1982 by Arthur Krim, one of the executives who had rescued United Artists in the early 1950s. In an industry marked by animosity between the “talent"--the creators and developers of films--and the “suits"--the executives who run the studios--Krim and his management team were admired for backing long-shot films such as “Amadeus” and “Platoon,” which became critical and commercial successes.
Despite Krim’s beloved status among Hollywood producers, some critics have charged that Orion used legal, but unusual, accounting techniques, masking the real performance of the company.
Orion’s Last Dance?
Despite the box-office and critical success of “Dances With Wolves” last year, financial problems forced Orion Pictures to scale back production in 1991 and then to file for bankruptcy court protection Wednesday.
1991 release Estimated cost Domestic gross The Silence of the Lambs $19.0 million $130.7 million Bill & Ted’s Bogus Journey $24.6 million $38.0 million Little Man Tate $9.0 million $21.7 million FX-2 $16.0 million $21.1 million Mystery Date $9.6 million $6.0 million Eve of Destruction $15.0 million $4.4 million