Billionaire to Offer a Proposal to Get Orion Back on Its Feet : Entertainment: John W. Kluge agrees to put up $25 million and forgive $29 million in debt to get the studio out of bankruptcy court.

John W. Kluge, reportedly America’s richest man, has agreed to infuse cash and forgive debts owed him as part of a deal to help rescue foundering Orion Pictures from bankruptcy, according to people familiar with the proposal.

Kluge, who already owns 68% of the studio’s stock, has agreed to put up $25 million in cash and to write off $29 million owed him in connection with Orion’s 1990 release of the film “Mermaids.”

The same sources said Kluge’s proposal is contingent on drawing another company into the deal to market Orion’s library and distribute its lineup of 10 unreleased pictures. The distributor, which would have to ante up an undisclosed amount of cash, would not receive an equity stake in the newly configured concern.

Three companies--MGM-Pathe Communications Co., Savoy Pictures Entertainment Inc. and Republic Pictures Corp.--are negotiating to acquire, merge or otherwise cooperate with Orion as it seeks to reorganize in Chapter 11 bankruptcy.

A spokesman for the 77-year-old Kluge--who with an estimated worth of $5.9 billion was ranked the wealthiest person in the United States last year by Forbes magazine--did not return calls.

“I think we’re finally in the homestretch here,” said Wilbur L. Ross Jr., the Manhattan investment banker who is advising Orion’s unsecured creditors, including bondholders and actors Jodie Foster and Kevin Costner.

Marc Abrams, a lawyer for Orion, said that in the past few days there have been “fairly dramatic breakthroughs in negotiations on this stand-alone plan,” which was developed by Orion.

“There was significant progress,” Abrams said.

Kluge had been aligned with New Line Cinema Corp. in an acquisition offer early this year, but New Line backed out in frustration after months of negotiation. Sources involved in the latest talks said Kluge apparently was inspired to return to the fray by drastic reductions in company expenses.

Orion, which in its heyday had annual operating costs of $90 million, has pared those to an estimated $34 million, according to the company’s most recent financial statements.

Orion had about 400 employees at the end of 1991, Ross noted, but the work force will have declined to 150 by next month. Orion and a top aide to Kluge announced Wednesday that an arrangement had been reached to release company co-founder Arthur Krim from his contract as of July 1.

Sutro & Co. securities analyst Steven E. Hill said he was optimistic that the deal could be completed.

“I think it makes a lot of sense,” Hill said. “Kluge is certainly interested in what type of reorganization takes place, because he owns so many shares. I think there is a reasonable likelihood that there will be an agreement.”

Still, the divergent interests involved in the Orion bankruptcy and the history of just the last six months suggest that the likelihood of a quick resolution is uncertain.

To succeed, any plan to reorganize Orion would need the backing of five parties: Kluge; Orion; the unsecured creditors; Sony Pictures Entertainment, which paid Orion $170 for foreign distribution rights to what was to have been 50 new Orion films, and a group of banks, headed by Manufacturers Hanover, which alone is owed $300 million.

Said one participant, who spoke on condition of anonymity: “I might vote more on the Crips and the Bloods keeping a truce than these guys making an agreement.”

Orion--which produced a string of Oscar-winning films, including “The Silence of the Lambs,” “Dances With Wolves” and “Amadeus”--filed last December for Chapter 11 protection. Before the filing, Kluge offered to contribute an amount of capital similar to the latest proposed deal; the other parties, including bondholders, could not agree.

Kluge, who holds his Orion stake through his privately held Metromedia Co., has sunk an estimated $250 million to $300 million into Orion since becoming a shareholder in the late 1980s.

The public tip-off of Kluge’s possible interest in making the cash contribution and forgiving the debt came at a court hearing Tuesday. Lawyers representing Orion said the negotiations to reorganize the company had reached a possible turning point. U.S. Bankruptcy Judge Burton R. Lifland extended Orion’s operating budget and related authorizations for one more month.

John W. Kluge

Net Worth: Estimated at $5.9 billion in 1991

Major Assets: Metromedia Co., Orion Pictures (70%), Ponderosa Steak chain, a 10,000-acre estate in Virginia and a Scottish castle with 80,000 acres