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reorganization.157 Under each of those plans, the holders of
Carolco subordinated notes were in class 10 and the holders of
Carolco preferred stock were in class 12. In the planned
liquidation of Carolco, holders of class 10 and 12 assets were to
receive nothing. According to the second plan of reorganization,
the liquidation of Carolco commenced with the sale of the Carolco
film library and continued with the sale of certain projects,
Carolco’s studio, and other assets. As a result of the sale of
these items, Carolco would hold approximately $60 million cash,
which was the largest asset in the bankruptcy proceeding. Other
than this cash asset, the only remaining assets of significant
value were certain projects and litigation claims. A disclosure
statement accompanying the second plan of reorganization dated
December 3, 1996, presented three scenarios showing a range of
possible outcomes from the Carolco liquidation. Carolco
estimated that under any of the three scenarios, class 9 through
13 creditors, including holders of the Carolco securities, would
receive nothing from the bankruptcy. Considering the information
available as of December 11, 1996, it was highly unlikely that
SMHC would recover anything on the Carolco securities. Clearly,
the plans of reorganization and the disclosure statement (which
157 The first plan of reorganization was filed on Sept. 13,
1996, and the second plan of reorganization was filed on Dec. 3,
1996.
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