Dark Clouds Over Carolco, Lightstorm?

Parents wanting to steer their children clear of dangerous professions might want to add independent film executive to a list that typically includes policeman, lion tamer and soldier of fortune.

Sure, the pay and perks are good. But consider the downside: Near-insurmountable odds against success, nervous banks, forced alliances with foreign partners who can be fickle, pesky bonding companies or no bonding companies at all. And the list goes on.

Carolco Pictures and Lightstorm Entertainment, two of the most prominent players in a field already littered with casualties, know the problems well.

In the case of perpetually troubled Carolco, there are reports that it may soon be forced to go forward with a prepackaged bankruptcy to stave off bondholders and the talent guilds. At Lightstorm, the resignation this week of a top executive has fueled concern that it too is on shaky ground.

The Lightstorm rumblings are especially telling of independents’ lot, given the company’s unusually strong pedigree. Heading the operation is James Cameron, the director of super-successful action epics such as “Terminator 2: Judgment Day” and “Aliens.” Cameron set up Lightstorm last year with the help of his high-powered agent, International Creative Management Chairman Jeff Berg, after “Terminator 2” took in more than $500 million worldwide.

Cameron’s idea was to own his own films and control his own destiny. But destiny may have other ideas. Sources close to the company say Lightstorm is struggling to hold together its patchwork alliance of foreign partners: Italy’s Artisti Associati, Germany’s Jugendfilm and Japan’s Nipon Herald. There are also widespread reports of short-term cash-flow problems.

One commonly advanced scenario has Lightstorm broadening its deal with 20th Century Fox, which put up the initial 30% of its funding. Another partner with an interest in keeping Lightstorm afloat is Universal Pictures, which has certain foreign-distribution rights to Cameron’s films through United International Pictures.

Sources close to the company say Lightstorm is in “intense” negotiations with Fox to raise its investment, and possibly to insure any cost overruns. One problem for all independents these days is finding insurance, since the bonding business is in disarray. Fox declined to comment, but Cameron denies the rumors.

The director said Lightstorm is fully funded and will begin production Aug. 9 as scheduled on a project tentatively titled “True Lies,” starring Arnold Schwarzenegger. “To my knowledge, none of my distribution partners has cold feet,” he said.

Cameron also brushes aside concern over Wednesday’s resignation of Larry Kasanoff, his former partner. Some took Kasanoff’s explanation--in which he said, “I am at heart a company builder”--as a sign that Lightstorm was retreating from its initial business plan. Cameron said it came down to different priorities. While Kasanoff pressed him to expand into areas such as television, Cameron said he wanted to focus on a limited number of film projects.

“For this to work perfectly, I have to feel that the person in Larry’s job is another lobe of my brain,” Cameron said. “Larry and I over the last few months increasingly realized he wanted to take the company in a certain direction that I didn’t.”

Cameron, at the same time, concedes that he faces a tough battle to make the company work long-term. While the deal has a 12-picture cap, he said it might result in as little as two. “Let’s face it,” he said. “Every independent company is experiencing (problems) now.”

Carolco is a prime example. Despite the runaway success of “Terminator 2” and the “Rambo” series, Carolco is in a perennial cash crunch. The company’s latest restructuring plan, which is 750 pages long, is predicated on considerable goodwill. At least 85% of the company’s bondholders are being asked to accept new bonds paying 10%, compared to a current 14% yield.

Company sources say Carolco has won concessions from only about 70% of the bondholders so far. The major talent guilds must also agree to accept delays on payments of about $15 million they are owed.

“Cliffhanger,” Carolco’s latest movie, is expected to gross as much as $85 million domestically. But the company is not expected to see any big returns for years because of financing deals.

One scenario has cable giant Tele-Communications Inc. rescuing Carolco with its agreement to pay $90 million for pay-per-view rights to certain films. But sources close to the talks say the money will not be paid until the films are underway.

Carolco Chairman Mario Kassar declined comment. Carolco technically has until June 30 to resolve matters. However, sources say the company could uncork its prepackaged bankruptcy plan sooner if the negotiations run hopelessly aground.

Carolco’s partners--RCS Video International, Canal Plus, Pioneer and MGM Holdings Corp.--are unlikely to offer more concessions than they already have for the restructuring. Yet one executive insists Carolco has two things going for it: Pioneer’s supposed distaste for being connected with a bankruptcy and the personal popularity of Kassar.

“The partners still believe in Mario,” one source said. “And the community likes his passion. Even if the company folded, Mario would have a deal in 10 seconds.”

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MacDonald Speaks: Producer William MacDonald has joined Robert Evans in objecting to press accounts of a class-action lawsuit in which the two are named. MacDonald said it is “grossly misleading” to single him out for attention in the alleged fraud case, which involves more than a dozen companies. The case claims that MacDonald and Evans were tied to a company that received more than $6 million from private investors. MacDonald said he had no connection to the company.