CANNES: Morgan Creek Cancels Festival Party
Though the international distribution arm of Morgan Creek Productions filed for bankruptcy protection May 3, the venerable film production company says it does not expect the matter to impact its ability to produce and release films.
However, at least one change is afoot for the producer of such films as Robin Hood: Prince of Thieves and Major League: Morgan Creek will not throw its annual Cannes Film Festival brunch this year.
More pressing than the posh party is the Chapter 15 bankruptcy of Bermuda-based Inverness Distribution Ltd., which changed its name from Morgan Creek International in April 2010. The company filed for bankruptcy protection in federal court in Manhattan -- citing debts of up to $100 million -- after a sharp drop in royalty payments from the licensing of its films. Inverness holds the rights to such movies as The Last of the Mohicans and Young Guns. In court filings, Inverness said it was roughly $74 million in debt on a $150 million loan issued by Societe Generale, ING Bank NV and Bank of Ireland, among others. It did not include an estimate of its assets in the filing.
Morgan Creek spokesman Greg Mielcarz said in an e-mail interview that the Inverness bankruptcy might have only a minor impact on the company and would not stop it from moving forward with projects such as its long-gestating Tupac Shakur biopic or the planned restart of the Major League franchise.
"The bankruptcy could result in the loss of certain distribution rights, in certain foreign territories on some of our older films," said Mielcarz, describing Morgan Creek's potential risks in the Inverness bankruptcy.
It is unclear exactly how Inverness' relationship with Morgan Creek exposes the production company to the bankruptcy matter, though its slight risk appears to stem from the $150 million loan Inverness received in 2005.
As collateral for the loan, Inverness gave its lenders the right to "distribute, lease, license, sell exhibit, broadcast" its film catalog, according to court documents.
Chapter 15 is a rarely used section of the bankruptcy code that is employed to stave off creditors who may seek the stateside assets of an international entity.
"It's a defensive move to preserve the assets that are in the United States and it speaks to a sophisticated [business] structure," said Larry Perkins, senior managing director at Conway MacKenzie, a financial and operational turnaround services firm headquartered in Detroit.
Indeed, some observers view the complicated maneuver as a way for Morgan Creek CEO James Robinson to insulate himself and his company from a failed overseas venture and minimize financial exposure to the large loan, which was in default prior to the bankruptcy. Robinson was also the president and sole shareholder of Inverness until its bankruptcy.
But Perkins said the Inverness bankruptcy could point to larger problems at Morgan Creek. "In any case like this, where there is smoke there is usually a little bit of fire. If one of the entities is filing for bankruptcy, it usually means that all signs aren't green."
Inverness said in court filings that it "experienced a dramatic and unexplained decline" in revenues received from movie studios in exchange for home video and television rights. The filings indicate the company controls several film libraries; one showed a decline in revenue of 71% in the fourth quarter, while other libraries showed a decline of 36%.
In the brief e-mail interview, Mielcarz distanced Morgan Creek from Inverness, noting that two are "completely separate entities."
Robinson and Rick Nicita, the former CAA managing partner who joined Morgan Creek as co-chairman in 2008, declined to comment.
Morgan Creek, co-founded in 1988 by Robinson and Joe Roth, hit its stride quickly with hits such as Major League (1989), Robin Hood (1991) and Ace Ventura: Pet Detective (1994). But production has slowed to a trickle in recent years: The company hasn't released a film since Sydney White, which came out in 2007 and underperformed.
"It's depressing to read that revenues have been so bad that it has pushed them to this point," said Jay Dougherty, a professor at Loyola Law School who worked at Morgan Creek in the late 1980s and early 1990s as vp business and legal affairs. "They were one of the independent film finance and production companies that seemed to have a very effective business plan."
Robinson started off in the automobile import services business in his native Baltimore, where his company handled the servicing and cleaning of cars shipped into the U.S. via the city's port. In the 1970s he became a massive Subaru distributor, supplying cars and parts throughout a 93-dealership territory. The sale of that business in 1988 created the seed money to get Morgan Creek off the ground.
Robinson had been in negotiations last year to join construction mogul Ron Tutor, investor Tom Barrack and others who ultimately purchased Miramax Films from Disney in December. He was to have invested up to $100 million in the deal, and Morgan Creek was to distribute Miramax films internationally. However, Robinson pulled out of the deal in late summer; his participation is said to have been scrapped over managerial control of Miramax.
Morgan Creek's annual Cannes Film Festival brunch was an intimate and posh affair for those who could snag an invite. It was held at Moulin de Mougins, one of France's most famous restaurants. (The since-retired Roger Verge, father of modern French cooking, founded the eatery.)
Even though the party is not happening, Morgan Creek executives will still attend the festival, which begins May 11. While there, they will be in search of films to acquire. Also, the company plans to meet with its international distributors to discuss marketing strategies for Dream House, Morgan Creek's forthcoming Daniel Craig-starring drama, Mielcarz said. The $55 million film will be released on Sept. 30 by Universal. Unlike in years past, Robinson will not be attending the festival; Mielcarz said Robinson instead is "focusing on the post-production schedule for Dream House," which required reshoots.
Much of Morgan Creek's plans and projects are unclear. It has a distribution deal with Universal, though the pact is set to expire at the end of 2012 and the company's distributions plans beyond then are unknown. (Mielcarz declined to comment on the matter.)
Morgan Creek had been slated to produce Major League 3, but Robinson said in February that he wouldn't risk working with star Charlie Sheen because of the actor's recent erratic behavior. In widely circulated comments, Robinson compared Sheen to Lindsay Lohan, whom the producer reprimanded publicly in 2006 for excessive partying while making Georgia Rule.
However, Morgan Creek's untitled Tupac biopic is expected to begin shooting by the end of summer, Mielcarz said. The Antoine Fuqua-directed project had been bogged down by a lengthy legal dispute between Morgan Creek and the estate of the late rapper, but the matter was settled before a scheduled trial in February.