Weinstein Bankruptcy Sale Approved as Movie Industry Grouses
(Bloomberg) -- Weinstein Co., the movie company hobbled by sexual harassment claims against co-founder Harvey Weinstein, won court approval to sell itself to Lantern Entertainment in a deal worth about $437 million including debt.
U.S. Bankruptcy Judge Mary Walrath said Tuesday in federal court in Delaware she would approve the deal, which includes $310 million in cash that will be used to pay whatever secured debt Lantern doesn’t take on as well as the sexual harassment claims that forced Weinstein Co. into bankruptcy.
The company still faces nearly 100 objections to the sale from various people and organizations in the entertainment industry. Those complaints mostly involve small amounts of debt that must be resolved before Lantern can take over the valuable television and movie contracts it is purchasing.
Once the sale closes, much of the cash will be set aside as creditors begin the process of fighting over how it will be divided. Weinstein said it owed banks and other secured lenders more than $344 million, part of which will be assumed by Lantern. Creditors, including those with sexual harassment claims against Weinstein, will fight over whatever amount remains, with the judge making the final decision about whether to approve any distribution proposal.
In the days after the sale was announced last week, dozens of major Hollywood players rushed to court to lodge their complaints, most of which came under the legal heading of “cure objections.” The company will try to resolve these in the coming days before the deal is final. Lantern has agreed to buy the Weinstein assets no matter how those claims are handled.
Weinstein bankruptcy attorney Paul Zumbro opened the hearing in federal court on Tuesday by referring to “a number of objections to the sale,” prompting laughter from the standing-room only crowd of attorneys, financial professionals and reporters. So many Hollywood companies sent representatives that Walrath had the audio feed piped into a second courtroom.
Included among the objections:
- Netflix Inc. said that the streaming service will withhold a $1.6 million payment until a dispute related to the British gangster show “Peaky Blinders” is resolved.
- The BBC complained that Weinstein miscalculated a bankruptcy-payment, known as a cure amount, owed on the films “Woman in Gold” and “My Week With Marilyn.”
- American comedian Kevin Hart demanded assurances that Lantern would honor payments he claims Weinstein owes for the film “The Untouchables,” a remake of a French film with the same name.
- A&E Television Networks claimed it was incorrectly named as a counterparty to contracts it has nothing to do with.
All of the complaints being put off involve television and film contracts Weinstein is handing off to Lantern as part of the deal. It took more than 2,100 pages just to list those contracts and the counterparties in a pair of court documents filed in April.
Lantern is assuming about $127 million in debt, much of which is related to ongoing projects it is acquiring. The Dallas-based private equity firm also bought 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.”
Debra Grassgreen, a lawyer for a committee of unsecured creditors said that after deductions, the sale of Weinstein Co.’s film and television business to Lantern Entertainment may only bring in about $260 million, not the $310 million in cash listed in the purchase agreement.
That means there won’t be enough to pay all creditors in full, Grassgreen said. The committee she represents includes women who have sexual harassment claims against the company or its former executives.
Weinstein, founded in 2005 by Harvey Weinstein and his brother Robert, filed bankruptcy March 19 blaming a backlash related to the harassment allegations. A New York Times article reported harassment claims against Harvey, and even after the company fired him, it faced "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. There are dozens of sexual harassment claims against Harvey Weinstein, who has denied having non-consensual sex.
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. Lantern will not be responsible for paying those claims under the sale. Instead, the Weinstein Co. will remain in bankruptcy and develop a plan to distribute the sale proceeds among its remaining creditors.
The case is In re: The Weinstein Company Holdings LLC, 18-10601, U.S. Bankruptcy Court, District of Delaware (Wilmington)
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