Weinstein Co. Files for Bankruptcy With Plan to Sell Itself
(Bloomberg) -- Weinstein Co., the movie company hobbled by more than 80 sexual harassment claims against co-founder Harvey Weinstein, filed for bankruptcy with plans to sell its entertainment assets.
Lantern Capital Partners offered $310 million for the film and TV studio, which fired co-founder Harvey Weinstein amid a backlash over the claims. The Dallas-based private equity firm, if it’s not outbid, would take on assets including a library of more than 277 films that have generated $2 billion of box-office sales and a television business with hits including “Project Runway.”
The company, founded in 2005 by Harvey Weinstein and his brother Robert, owes banks and creditors more than $367 million, according to court documents. Among the list of unsecured creditors: a unit of Chinese billionaire Wang Jianlin’s Dalian Wanda Group Co., David Boies’ law firm, and Viacom Inc.
Bankruptcy documents detailed the company’s dramatic decline. Even after it fired Harvey Weinstein in October following a New York Times article reporting the first harassment claims, the company faced an “immediate and intense” backlash, Robert Del Genio, an adviser with FTI Consulting who’s been acting as the studio’s chief restructuring officer, said in a court filing. Harvey Weinstein has denied having non-consensual sex.
Allegations sprung up around the world, prompting police departments in the U.S. and U.K. to open investigations and sparking the so-called #metoo movement and Time’s Up campaigns. Five members of the board resigned in October, and other employees followed suit.
Meanwhile, the company increasingly found itself a pariah in the entertainment industry, the court filings show. The film division of New York public relations firm Ketchum ended a production and distribution agreement on Oct. 6, and then Apple Inc. killed plans for a 10-part Elvis biopic three days later. In the following weeks, Amazon Studios scrapped a deal with Weinstein for a drama series by David O. Russell, the Oscar-nominated director of “Silver Linings Playbook.” Viacom and A&E Television Networks LLC also pulled projects.
As the backlash intensified, “Even longstanding business partners have refused to return the company’s phone calls,” Del Genio wrote in the court filings.
Financing became harder to come by. Tom Barrack’s Colony Capital soon dropped plans to provide a cash infusion, and Fortress Investment Group LLC’s negotiations to provide a $35 million lifeline were said to end. One lender, AI International Holdings, affiliated with Len Blavatnik’s Access Industries, sued, claiming Weinstein’s departure was an event of default under a $45 million loan.
As part of the bankruptcy and sale, Weinstein Co. has agreed to release any women who settled sexual harassment claims from their non-disclosure agreements, freeing them to tell their stories without fear of being sued. Actresses who have accused Weinstein include Dominique Huett, who claimed he masturbated in front of her and forcibly performed oral sex on her in 2010, suing for $5 million; and Uma Thurman, who starred in some of Weinstein’s hit movies, such as “Pulp Fiction” and the “Kill Bill” films.
“No one should be afraid to speak out or coerced to stay quiet,” the company said in a statement.
If the offer by an affiliate of Lantern prevails, the firm would be taking on a company now missing a quarter of its employees along with several key executives. Lantern’s portfolio currently includes underperforming auto dealers and an industrial-waste recycling business. Any sale must be approved by Judge Mary Walrath in the Chapter 11 case in Wilmington, Delaware, and a higher offer for the business could still emerge.
Lantern had previously backed an unsuccessful $500 million out-of-court bid by Maria Contreras-Sweet, the former Small Business Administration chief. Contreras-Sweet backed out after discovering liabilities were above a previously estimated $225 million. Her group, which also included billionaires Ron Burkle and Blavatnik, indicated it would consider the assets again if they became available in a bankruptcy.
Bankruptcies are often used to cleave profitable assets from legacy liability, with the economic rationale of giving a promising business a new start. They usually do so through a trust, which caps the amount that can flow out for issues like faulty products or toxic pollution exposure. Before Contreras-Sweet’s group pulled its bid, New York Attorney General Eric Schneiderman suggested in a lawsuit against Harvey Weinstein and his company that the sale might leave victims without enough funding for such a trust.
The company has yet to document how it will handle the harassment claims through the reorganization, but the proposed deal with Lantern shows that the liabilities from the claims -- as well as any assets that could come in if the estate successfully sues other parties such as directors or employees over them -- will remain behind after the sale.
The case is In re: The Weinstein Company Holdings LLC, 18-10601, U.S. Bankruptcy Court, District of Delaware (Wilmington)
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