Carolco’s temptation

Carolco sweetened its offer to noteholders Wednesday, hoping to take the amended inducement for 100 cents on the dollar for each of the two classes of outstanding notes.

But even if the company gets an 85% nod of approval on the amended offer for both classes of bonds, holders of the 14% senior notes and 13% senior subordinated notes must actually tender at least 85% of their bonds so the company can reorganize itself outside of bankruptcy court.

If only two-thirds — or about 66% — of the notes are actually tendered, Carolco will file a prepackaged bankruptcy.

Sources involved in the bond restructuring say that about two-thirds of the 14% noteholders and about 80% of the 13% noteholders have already approved the amended offer — amounts that already meet the prepackaged bankruptcy requirement.

Basically, the amended offer means 14% noteholders will receive 100 cents instead of 95 cents on the dollar, while 13% holders will get 100 cents instead of only 60 cents on the dollar.

“This amended offer is the closest Carolco will ever get to people tendering their bonds,” said one holder of 14% notes. “From a bondholder’s perspective, you’re looking at recovery on bonds at 100 cents for a company that blew up.”

Aside from the revised offer, sources close to the company said the indie is about to receive a sizable cash infusion from its lender Credit Lyonnais. Others said Carolco exex are in final negotiations with the bank for a new loan, the amount unknown.

According to Carolco’s most recent financial statement, its outstanding CL credit line is $ 100,000.

A Carolco spokeswoman declined comment on any discussions with CL.

But in a prepared statement, Carolco said its latest bond offering is crucial to the company’s restructuring, which is subject to shareholder approval.

“There is no assurance that these (restructuring) conditions will be satisfied, that the restructuring will be consummated or that the restructuring will be consummated on the terms currently contemplated or described in the registration amendment,” Carolco said. “If the restructuring is not consummated and the company does not find another source of financing, (it) will be unable to continue to operate as a going concern.”

The improved bondholder offering awaits approval from the Securities & Exchange Commission. Once received, Carolco said it will launch its restructuring plan.

The improved offer comes as no surprise. Last month sources disclosed that 14 % noteholders (whose bonds matured last month) would be handed a revised seven-year note bearing an interest rate of 11.5% on the $ 33.8 million in outstanding debt.

That rate dips to 10% when TeleCommunications Inc. puts up the first $ 10 million in equity under its proposed deal to do pay-per-view premieres on four Carolco releases over the next five years. (That $ 10 million is paid when Carolco starts principal photography on the first PPV film.)

Holders of the 13% notes will get a new six-year note bearing the same interest rate on $ 16.1 million in outstanding debt. But the 13% rate drops to 12% after two years, again when TCI issues the first $ 10 million.

Both classes of noteholders who exchange their bonds will also receive a cash payment on interest that accrues on the new notes from Dec. 1, 1992 to the date the new notes are issued.

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