Hoffman to Step Down as Carolco Chief

Carolco Pictures said Monday that its chief executive, Peter Hoffman, will step down after his contract expires in March, ending months of speculation that the top strategist behind the independent studio’s rapid diversification was on the way out.

Best known as the producer of such big-budget action films as “Terminator 2: Judgment Day” and “Total Recall,” Carolco now is retrenching after expanding into everything from record store chains to home video distribution,

Hoffman, a former entertainment lawyer, was known for his financial savvy and ties to Wall Street. Over the past year, however, he repeatedly clashed with flamboyant Carolco Chairman Mario F. Kassar over creative and business dealings.

“Peter’s a brilliant strategist,” said Jeff Logsdon, an entertainment analyst at Seidler Amdec Securities in Los Angeles. “But the future of the company doesn’t lie in complexity. It lies in simplicity.”

Carolco did not name a replacement for Hoffman but said Kassar would take on the chief executive’s role until a successor is named.

Many in Hollywood are privately betting that Beverly Hills-based Carolco could be the next studio to file for Chapter 11 bankruptcy reorganization. The company has declined to comment on the speculation, but some analysts express confidence that Carolco will get through its current crisis if bankers and bondholders give it enough time and maneuvering room to prune its operations.

Carolco may now sell two record chains it acquired in recent years and refocus on producing annually two or three of the costly action-adventure films for which it is famous, analysts said. Earlier this month, it dropped a plan to acquire the 47% of Live Entertainment, a Van Nuys videocassette distributor, that it did not already own.

Discord in the executive suite hasn’t been Carolco’s only problem. For the first nine months of this year, it reported losses totaling $91 million on revenue of $446 million. The losses are partly due to writeoffs associated with its 53% stake in Live Entertainment.

Analysts are also concerned about Carolco’s overall debt of $521 million. On Monday, Carolco offered to buy back all $67.5 million of its 14% senior notes due in 1993 for 65 cents on the dollar. The offer expires Jan. 28.

Hoffman indicated at Carolco’s annual shareholders meeting in August that the studio might seek to cut debt by repurchasing its 14% notes. The purchase would be financed by funds raised through a private placement of convertible stock in November.

But some analysts aren’t confident that its offer is sufficient.

“I don’t know anybody who would tender,” said Steven Hill, an analyst with Sutro & Co. in San Francisco. Carolco said that if it received less than 100% of the notes, it would instead try to buy slightly more than half of the outstanding debt between 66 cents and 85 cents on the dollar.

Much of the pressure to clean up Carolco’s financial condition is coming from a series of partners Kassar took on over the past year.

Kassar, who controls 38% of Carolco, has raised more than $170 million by selling equity stakes in the studio to overseas investors such as France’s Canal Plus, Pioneer Electronics Corp. of Japan and Italy’s RCS Group.

But analysts said those partners will have to inject more capital to keep Carolco producing its trademark big-budget films.