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Company Town : Carolco May Be Close to Restructuring

As a movie producer of such action pictures as the “Rambo” series, “Basic Instinct” and “Terminator 2: Judgment Day,” Carolco Pictures has given movie audiences plenty of thrill rides.

The same is true for the company’s investors, who have experienced enough ups and downs in the past few years to make anyone queasy.

The latest talk that continues to surround the perpetually ailing company and its chairman, Mario Kassar, is that a restructuring may be near that includes a “prepackaged” bankruptcy filing.

The company is known to have discussed such an option off and on for some time, and has even raised the possibility of a prepackaged bankruptcy in previous filings with the Securities and Exchange Commission. It hasn’t helped that the company just went through a round of layoffs and that former Chief Financial Officer William A. Shpall left at the end of last year for another venture.

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One source, who has been involved in some Carolco restructuring discussions, said that any such move would likely come after Carolco’s epic pirate adventure, “Cutthroat Island,” is finished this spring, since any move by Carolco would probably cause adverse publicity for the film.

A Carolco spokesman said no one at the company could comment on any of the speculation or a pending prepackaged bankruptcy. In such a bankruptcy, the company gets together with creditors to agree on details of the plan in advance. Carolco’s major investors include such companies as Japan’s Pioneer, the French bank Credit Lyonnais and France’s Canal Plus.

The good news for Carolco is that after weeks of uncertainty, “Cutthroat Island” is now finally financed with a loan said to be close to $60 million. The big-budget movie, starring Geena Davis and Matthew Modine and directed by Davis’ husband, Renny Harlin, started shooting without full funding. Carolco had warned that the production could have been shut down if loan negotiations fell through.

In documents filed last November, Carolco estimated the cost of the picture at $75 million, though sources familiar with the budget say it has grown well beyond that.

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Sources in Hollywood note that Carolco has long been one of the industry’s most unpredictable companies, so no development--positive or negative--would come as a surprise.

Carolco’s movies have been among Hollywood’s biggest box office hits in recent years, though critics have argued that the firm’s financial structure and excessive spending allowed little cash to flow to the bottom line.

Last year, the company issued ominous warnings about its future in SEC documents, noting that it expected to continue bleeding red ink this year.

Still, Hollywood executives note that Kassar has a Houdini-like ability to escape from peril, as when Carolco narrowly averted bankruptcy in 1993 through a financial restructuring. And, as he showed from his involvement with the recent MGM hit “Stargate,” he still has a touch with big-budget films.

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“You’ve heard of a cat with nine lives? Mario has 13,” said one executive close to the company.

But pessimists note that Carolco has nothing on deck after “Cutthroat Island.” To raise cash, it has sold the rights to a number of projects, including the controversial film “Showgirls” to French company Chargeurs.

Now speculation is building that Kassar may be eager to set up his his own production firm and leave Carolco’s troubles behind.

“Mario’s plan is to find someone to run the company as debtor-in-possession in a prepackaged bankruptcy, someone who wouldn’t buck him on his plans, someone he could trust,” said a source close to the company.

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The source noted that Kassar would prefer such an arrangement to a court-appointed trustee who might challenge any projects he wanted to take with him should he leave.

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Guber update: Last week, it was confirmed that Sony Pictures Executive Vice President Paul Schaeffer would soon join a venture led by former Sony Chairman Peter Guber as the company’s top corporate officer.

Now sources say Guber is on the verge of disclosing another major hire in Adam Platnick, chief operating officer at Warner Bros.-based New Regency Productions--as president, overseeing film and TV.

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Platnick declined to comment and Guber could not be reached.

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Inside Hollywood

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