Fox Will Buy Most Assets of Ailing Carolco : Hollywood: The long-troubled producer of mega-budget movies files for Chapter 11 bankruptcy protection. CEO Kassar resigns.

Twentieth Century Fox Film Corp. on Friday agreed to buy nearly all the assets of mega-budget movie producer Carolco Pictures for $50 million, ending one of the wildest rides among Hollywood production companies.

Also Friday, long-troubled Carolco filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, a move that had been widely expected and discussed for weeks with creditors. The filing is designed to make the sale of the company go smoother by giving Fox the assets free of any liens.

Separately, Carolco Chief Executive Mario Kassar resigned from the Los Angeles company and in effect becomes a free agent in Hollywood.

There are as yet no plans for Kassar to set up a production unit at Fox as part of the deal, Fox President Bill Mechanic said. Separate sources said Kassar has been in discussions to arrange a production deal at the studio, as well as at MCA Inc. and Cinergi Pictures, which is headed by his former partner at Carolco, Andrew Vajna.

Kassar agreed to remain a consultant to Carolco and to provide promotional services related to the upcoming Carolco film “Cutthroat Island” scheduled to be released by Metro-Goldwyn-Mayer.

The company was founded in 1976 by Kassar and Vajna and became known as a spare-no-cost producer of so-called “event films,” turning out such major international hits as the “Rambo” films, “Terminator 2: Judgment Day,” “Basic Instinct” and “Cliffhanger.” The total worldwide gross for its films is said to be more than $2.5 billion.

The company also made headlines by paying dearly for talent, such as $12 million to actor Michael Douglas to star in “Basic Instinct” and a jet to “Terminator 2” star Arnold Schwarzenegger.

But Carolco also made some costly flops, notably “Chaplin.”

To some extent, Carolco’s troubles are a reflection of the troubles that plague many production companies, where a box office bomb or two can wipe out the profits of previous hits.

But Carolco was in a league of its own as a financial mess, suffering from a big debt load and out-of-control overhead costs. The company rented yachts at film festivals and paid Kassar about $2 million a year in salary as well as hundreds of thousands more in expenses--including his home gardening services.

Carolco’s often shaky financial condition meant it frequently wasn’t in the negotiating position to reap much from some of its hits, such as “Cliffhanger,” which turned out to be much more of a financial success for distributor TriStar Pictures.

Fox is inheriting the Carolco library, as well as a stake in the development rights of such film projects as “Spiderman” and the sequel rights to such films as “Total Recall.”

Fox isn’t taking on certain accounts receivable and cash. Also unaffected in the sale is “Cutthroat Island,” due out in December, or another pending project, “Lolita.”

Carolco’s major investors, which include such foreign-owned companies as Pioneer, Metro-Goldwyn-Mayer and Canal Plus, aren’t likely to see much of their investment. Sources said that holders of about $58 million in bond debt are hoping to get back about 60 cents or more on the dollar. The company also owes about $6.5 million to Credit Lyonnais and about $10 million to Hollywood’s talent guilds.

Bankruptcy lawyer Richard Wynne, representing the bondholders, vowed that the bondholders will aggressively search to find any other potential Carolco assets available to liquidate, and also plan to investigate thoroughly the reasons why the company failed.

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Times staff writer Elaine Dutka contributed to this report.