Company Town : Carolco-Live Merger Looks Dead

In another setback for big-budget movie producer Carolco Pictures, the company disclosed Thursday that its proposed merger with video distributor Live Entertainment has fallen apart.

Cash-poor Carolco has warned that because it is so highly leveraged, raising money on favorable terms would be substantially more difficult if it failed to complete its merger with Live. It has also warned that it might not survive due to its funds crunch.

The unraveling of the Live negotiations comes at a bad time for Carolco, which would say only that the deal was called off for “a number of factors.”

The company, which produced such box office hits as the “Rambo” series, “Terminator 2: Judgment Day” and “Basic Instinct,” is scrambling to nail down funds needed to launch its big-budget picture “Cutthroat Island,” starring Geena Davis and directed by her husband, Renny Harlin.

The company is trying to sell its interest in another film, “Showgirls,” and sources said France’s Chargeurs is planning to buy it. Carolco declined to comment.

The company has also said it arranged a $63-million production loan for “Cutthroat Island” with a group of lenders, but it lacks the necessary completion bond, which guarantees lenders that the film will be delivered on time and on budget.

Carolco once held a majority interest in Live, but it has been reduced steadily over the years. Under the proposed merger, Live stockholders would have owned as much as 28% of the surviving company; Carolco stockholders would have owned the rest.

Earlier this month, the New York Stock Exchange suspended trading in both Carolco and Live as the firms fell below the criteria of net tangible assets.