Court Approves 'Stalking Horse' Bid For Rhythm & Hues

9:09 PM PST 3/8/2013 by Carolyn Giardina

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"Life of Pi"

VFX House expects to have all in-house feature work completed by the beginning of May as an auction is set for March 27.

After an explosive document was filed yesterday that questioned Rhythm & Hues' leadership and recommended liquidating the company, a bankruptcy court on Friday approved a stalking horse bid from South Korea’s JS Communications to acquire embattled Rhythm & Hues.

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JS Communications will assume the roughly $17 million in loans from Universal and Fox, which were provided to keep R&H operational as it completes work on Universal's R.I.P.D., scheduled for release July 19, and Fox's Percy Jackson: Sea of Monsters, scheduled for Aug. 16. JS Communications will also pay an additional $1 million in cash, according to Peter Fishman, director at Houlihan Lokey, the lead financial advisor in the sale of the company.

STORY: Rhythm & Hues Bankruptcy Spurs Explosive 'Liquidation' Suggestion

Additional bids for the company will be accepted until March 22, and a bunkruptcy auction is scheduled for March 27. Fishman told The Hollywood Reporter that he expects several additional bids, "essentially all similar businesses to that of R&H." R&H—the VFX house behind the majority of the Oscar winning visual effects in Life of Pi that declared bankruptcy Feb. 13—is seeking a quick sale.

On Feb. 21, a judge approved an additional $4.9 million in financing that Legendary Pictures will pay Rhythm & Hues for the completion of VFX work on the movie, Seventh Son.

Lee Berger, president of R&H’s film division, told THR that work on the last of the three films in house is expected to be completed by early May.

Work on two additional films from Warner Bros.—300: Rise of an Empire and Black Sky—were in house at Rhythm & Hues as the time of the bankruptcy filing, but Berger said that Warners took those two projects to other vendors “for scheduling reasons.”

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In court papers filed last week, R&H's lawyers wrote, "The Debtor believes that it will be very challenging to get new or additional work from clients while it is still in Chapter 11, meaning that the Debtor will have no additional revenue to offset its current overhead until the Debtor consummates a sale transaction."

Bob Baradaran and Brian L. Davidoff of Greenberg Glusker serve as legal counsel.