PRODUCTION—Struggling Kushner-Locke Gets Needed Bank Reprieve

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Troubled television producer Kushner-Locke Co. received a one-month reprieve from its leading lender last week, providing it time to sell off its library and to explore other capital-generating options.

According to a filing with the Securities and Exchange Commission, Chase Manhattan Bank has agreed not to withdraw any money from Kushner-Locke’s existing Chase accounts until April 4.

The L.A. producer whose original television programs include “Your Mother Wears Combat Boots,” “The Brave Little Toaster,” “Teen Wolf” and “Erotic Confessions” stated in SEC documents that it is in default on its 1996 credit pact with Chase. Kushner-Locke stated that, as of Feb. 14, its debt to Chase amounts to $67.2 million.

Kushner-Locke management “does not expect that existing resources and cash from operating activities will be sufficient to fund the company’s planned production, acquisition and distribution activities and mandatory interest and debt repayments in the next 12 months,” the company stated in its SEC filing.

Adding to its problems, the company received a delisting warning from the Nasdaq National Market on Feb. 21. Kushner-Locke’s stock was trading at around 15 cents a share last week, well below Nasdaq’s $1-a-share minimum requirement. The stock hit its 52-week low in late December when it traded for 3 cents a share.

If Chase restricts use of capital, Kushner-Locke said it would not be able to meet operating requirements.

The company referred all questions to investor relations officer Jayson Young, who provided few details beyond those contained in the SEC filing.

“This isn’t a sudden thing,” he said. “It’s about dealing with things from the past. There are ebbs and flows in the entire industry, and most independent production companies are facing a difficult time right now.”

Kushner-Locke has hired investment bank Houlihan Lokey Howard & Zukin to help it pursue its revenue-generating options.

Officials from Chase and from Houlihan Lokey Howard & Zukin also declined to comment.

Wide-ranging collection

Founded in 1983 by Donald Kushner and Peter Locke, who now serve as co-chairmen, Kushner-Locke has produced and distributed television programs and movies domestically and internationally, ranging from Christian programming to erotic cable programming.

There are a few exceptions to the agreement with Chase that could allow the bank to collect its money sooner than April 4, including involuntary or voluntary bankruptcy proceedings. Also, any changes in management or failure to properly fund employee benefit plans would allow Chase to move on the loan, according to the SEC filing.

The company reported net income of $770,000 (6 cents per share) for the fourth quarter ended Dec. 31, up from a net loss of $5.5 million (40 cents per share) for the like year-earlier quarter.

Revenues, which slipped in the fourth quarter, are currently coming from licensing deals on programming from the company’s library. For the fourth quarter, the company reported revenues of $2.4 million, down from $16.9 million in the like year-earlier quarter.

That decline was attributed to a decrease in film and television revenues and to the sale of a portion of its interests in US SEARCH.com Inc., a fee-based search Web site for tracking people. Kushner-Locke once held an 80 percent stake in that site. Revenues were higher in the first quarter of 2000 because of revenues from “Picking up the Pieces,” a film starring Woody Allen that went straight to video. No comparably sized film has been released from Kushner-Locke since.

“When it comes to the international distribution business, they have a big problem,” said Jerry Isenberg, a producer and professor of USC’s School of Cinema and Television. “The vast bulk of television movie distribution is controlled by the various networks. The whole foreign distribution business is very difficult.”

Kushner-Locke is in post-production on “Harvard Man,” a film starring Sarah Michelle Gellar and written and directed by James Toback. Other recent projects include the feature films “Wolf Girl” and “The Lions Are Loose,” as well as the HBO series “Thrills.”

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