×
You will be redirected back to your article in seconds

Carolco board OKs MGM deal

Carolco is not only sleeping with the lion, it’s rolling in dough.

In a lengthy conference call late Monday night among Hollywood, Paris, Tokyo and New York, Carolco’s board approved MGM’s proposal to buy a stake in the financially troubled indie, and agreed to accept a $ 110 million infusion in new cash from Carolco’s strategic partners.

The sweeping decision opens the way for Carolco’s long-awaited restructuring, including retiring high-priced debt, issuing new stock to the key investors and gaining a much-needed credit line.

The action also reportedly rebuffs a last-minute bid by Savoy Pictures to merge with or buy a piece of Carolco. Savoy, said a source close to the negotiations, had made a counterbid to MGM with the advice of New York entertainment investment bankers Allen & Co.

Instead, Mario Kassar’s Carolco team OK’d MGM’s proposal to purchase an equity stake, in the 15% range, for $ 30 million in cash, plus receive a note for another $ 30 million that automatically converts to common stock when certain performance targets are met. MGM reportedly was advised by Beverly Hills investment bankers Bannon & Co. Both MGM and Bannon refused comment.

In addition, Carolco’s three strategic partners–France’s Canal Plus, Japan’s Pioneer and Italy’s Rizzoli–ponied up $ 60 million more in exchange for a new issue of preferred stock. The three will now hold between 50% and 60% of the company.

$ 50 mil co-prod’n coin

Also, the trio is kicking in another $ 50 million in co-production financing funds.

Daniels & Associates and Jefferson Capital Group Ltd. are advising Carolco. They also were unavailable for comment.

Bear Stearns & Co. reportedly is supplying a fairness opinion to the company’s shareholders. A filing with the Securities & Exchange Commission, detailing all the transactions, is expected tomorrow. “Carolco, overnight, will become an unleveraged company,” said one source.

The deal reportedly was not engineered by the French bank Credit Lyonnais, which owns MGM and is Carolco’s lender. “In fact,” said one observer, “MGM had to convince the bank.”

Clearly, both Carolco and MGM will be healthier, which is good for Credit Lyonnais. “What it means for MGM is that it puts them back in the same distribution range as the other majors,” said a source.

The move combines MGM’s annual output of 10 films plus a couple of pickups a year, with Carolco, which at its peak was generating four to six.

Take over from TriStar

MGM now will pick up a five-year deal for distribution rights from TriStar Pictures when that deal expires in January 1994.

In the meantime, the new money will go a long way toward solving some pressing problems for the cash-starved Carolco. It faces paying $ 3.4 million in missed interest payments on two issues of debt by the end of the month, but more likely will simply buy them back for a percent of their face value, which stands around $ 49.9 million.

The entire package will also loosen the leash that Credit Lyonnais has kept on Kassar, who is known for big-budget extravaganzas. After such a large commitment from the original investors, the bank is expected to step forward and increase a credit line which stood at $ 50 million.

More Biz

  • During an interview at her home

    Judith Krantz, Best-Selling Author and Columnist, Dies at 91

    Judith Krantz, a best-selling author known for her novels “Scruples” and “Princess Daisy,” died Saturday from natural causes, surrounded by family, friends and her four dogs at her Bel Air, California home, her publicist John Tellem confirmed. She was 91. Krantz began her career in journalism, working for Good Housekeeping writing freelance articles for Macleans, [...]

  • Plume of black smoke rising from

    Soundgarden, Tupac and Tom Petty Estates Sue Universal Music Over Fire Damage

    Attorneys representing Soundgarden, Hole, Steve Earle and the estates of Tupac and Tom Petty today filed a class-action lawsuit against Universal Music Group over the master recordings destroyed in a 2008 fire, the extent of which was revealed last week in a New York Times article. The lawsuit, obtained by Variety, seeks some “50% of [...]

  • John Prine, Kamasi Washington, Sub Pop

    John Prine, Kamasi Washington, Sub Pop Win Big at A2IM Libera Awards

    Out of all the awards shows Variety Music attends every year — and we hit a few — in many ways A2IM’s Libera Awards, which celebrate the tight-knit independent label sector, is the most fun. It’s got awards and performances and a host and people get dressed up and all that, but at the end [...]

  • A trading post sports the Spotify

    Spotify Determines That It Overpaid Publishers in 2018, Requests Refund

    When calculating the new, higher rates determined by the U.S Copyright Royalty Board — which Spotify, Amazon, Google and SiriusXM/Pandora have appealed — Spotify has determined that it overpaid publishers in 2018 and would like a refund. “According to the new CRB regulations, we overpaid most publishers in 2018,” a Spotify spokeperson said. “While the [...]

  • Los Angeles LGBT Center CEO Lorri

    Los Angeles LGBT Center Opens New Campus for Community's Most Vulnerable

    When Donald Trump became president in 2016, some had grave concerns about what that could mean for the LGBTQ community. It gave such serious pause to the backers of the historic Los Angeles LGBT Center that they even considered scrapping plans to build their $142 million Anita May Rosenstein Campus in Hollywood. Then again, that [...]

  • Jussie Smollett

    Judge to Appoint Special Prosecutor in Jussie Smollett Case

    In yet another bizarre twist, a Chicago judge on Friday ordered the appointment of a special prosecutor to review the hoax case against “Empire” actor Jussie Smollett. Judge Michael Toomin ruled that State’s Attorney Kim Foxx should have appointed a special prosecutor when she opted to recuse herself early in the case. Instead, Foxx turned [...]

  • LGBT Rights Around the World

    The State of LGBTQ Rights Globally

    Pride is on the march across the globe as more and more countries recognize the freedom and rights of their LGBTQ citizens. Homosexuality is now legal in a majority of the world’s 195 nations — the latest, Botswana, joined the list June 11 — and marriage equality prevails in nearly 30 territories, covering more than [...]

More From Our Brands

Access exclusive content