Carolco Pictures Pins Hopes for Rescue on Its ‘Universal Soldier’

For struggling Carolco Pictures, this may be Judgment Weekend.

The once highflying company that made the hit “Terminator 2: Judgment Day” is scrambling to avert bankruptcy and hoping that its latest violence-steeped fantasy, opening in theaters today, will help save it.

“My own opinion is that if (the new film, “Universal Soldier”) doesn’t open enormously this weekend, the equity investors will say, ‘Enough of this,’ ” said one industry observer, expressing a widely held view.

For the moment, Carolco executives are trying to persuade those investors to come up with enough cash to keep the Los Angeles-based company afloat, according to people familiar with Carolco. Those entreaties come as the company’s operations shrink, and as lawyers for writers, directors and technicians threaten to plunge Carolco into involuntary bankruptcy proceedings unless it makes millions of dollars of long-delayed payments.

“The guilds are threatening,” confirmed one Carolco official, speaking on a condition of anonymity. “They’ve become very aggressive, almost hostile.”

At a Carolco board meeting last Friday, directors of the publicly traded company received a briefing from Allen & Co., the New York investment banking firm hired as an adviser in June. According to one person privy to the meeting, Allen & Co. told the board that Carolco could not survive without a substantial cash infusion from its foreign investors.

The investors, called “strategic partners” by Carolco, are Le Studio Canal Plus of France; Pioneer Electronics Corp. of Japan, and RCS Video, an affiliate of Italy’s Rizzoli Corriere della Sera Group. Industry participants speculate that Carolco needs $25 million or more in the short term.

As an apparent defensive measure, Carolco has retained the Century City law firm of Levene & Eisenberg, one of Los Angeles’ leading bankruptcy specialists. David Reno, a spokesman for Carolco, confirmed that Levene & Eisenberg had been hired, replacing other bankruptcy counsel that had been retained since last November.

All of which underscores the significance of this weekend’s opening of “Universal Soldier.” Carolco hopes that the film will show that the company is still capable of producing a box-office hit.

And if it flops?

“When do the strategic partners stop buying equity and say this equity is going to be worth zero if the company doesn’t make it?” asked Steven E. Hill, a securities analyst who watches Carolco for Sutro & Co. “A lot is riding on ‘Universal Soldier.’ ”

Carolco Chairman Mario F. Kassar, whose 1991 compensation neared $2 million, counting perks, did not return calls seeking his comment. Calls to Kassar’s office were referred to New York-based officials who indicated that the company is seeking to satisfy the concerns of the guilds.

“All the major creditors (of Carolco) are engaged in constructive dialogue” with the company, said a spokeswoman. “The company’s position is that they are engaged in constructive dialogue.”

Carolco’s troubles have been building for some time:

* The company reported a 1991 year-end loss of $265.1 million--despite the success of “Terminator 2,” which has garnered about $500 million worldwide.

* In March, Carolco announced a restructuring that increased the roles played by the foreign investors and also called for the company to reduce its debts to lenders Credit Lyonnais, Bankers Trust Co. and Chemical Bank. Under terms described by Carolco, the banks would make available “up to . . . $23 million in new loans.”

However, Carolco reported in a subsequent Securities and Exchange Commission filing that it was unable to access that line of credit because it had not met the banks’ terms. “Failure to access these bank lines in the near future could have a material adverse effect on the company’s liquidity,” Carolco reported.

Carolco also owns a 49% stake in Live Entertainment Inc., a Van Nuys distributor of videotapes. Carolco formerly owned 53%, but sold a portion of its investment this year to its major foreign partners.

The restructuring also imposed a downsizing of Carolco’s staff and operations; Kassar said subsequently that the company would focus on producing two or three “event” movies each year.

In addition to “Universal Soldier,” Carolco already has in release “Basic Instinct,” a hit that has taken in nearly $110 million domestically. “Charlie,” a movie about film pioneer Charlie Chaplin, is to be released in December. “Cliffhanger,” another big-budget project starring Sylvester Stallone, is scheduled for release next year.

* On Tuesday, Carolco suspended plans for a shareholders rights offering that had been announced in the spring as a means of raising more capital. The idea imploded, however, because the new shares were offered at 2 1/8. Carolco’s stock has since fallen, closing Thursday at 1 1/2, up 1/8, in New York Stock Exchange trading.

With those and other developments, Wall Street’s former optimism for Carolco has waned.

“There just aren’t investors right now who are interested in the stock,” said Lisbeth R. Barron of S.G. Warburg & Co. in New York. “I think the Wall Street community generally has decided that it doesn’t want to tolerate the risks associated with some of these smaller film companies.”

Others, however, believe that Carolco, bolstered by its foreign partners and reduced overhead, may pull through. TriStar Chairman Michael Medavoy, whose company is distributing “Universal Soldier,” is among the optimists. “They’re in the middle of things, and I think they’ll solve it,” Medavoy said.

Said a Carolco official, well abreast of the company’s crisis: “This company has a great future. The problem is that we still have to deal with our past.”