Rhythm & Hues Bidder Withdraws

6:56 PM PST 03/19/2013 by Eriq Gardner

UPDATED: An auction to acquire the troubled VFX house is scheduled to happen next week, but the potential sale has taken a hit in advance.

South Korea’s JS Communications has pulled out of being the stalking-horse bidder for embattled Rhythm and Hues, The Hollywood Reporter has learned.

An auction to acquire the troubled VFX house is scheduled to happen next week, but in advance, the potential sale has taken a hit.

Rhythm & Hues has issued a release:

"Rhythm and Hues announced today that JS Communications, the previously designated Stalking Horse bidder for the company's assets, has indicated that it will miss its Court mandated deadline of March 19th to execute a binding Asset Sale and Purchase Agreement in connection with its Stalking Horse Bid.

"Other prospective bidders in the sale process have indicated that they intend to move forward as planned, and to submit bids by the March 22nd deadline for all bids. Rhythm and Hues, and its counsel and advisors, as well as the Official Creditors Committee, continue to interact with prospective purchasers on details of their potential bids and anticipate a competitive auction on March 27th.

"The successful bidder will have its bid presented to the Bankruptcy Court for approval on March 28th and, if approved by the court, the transaction is slated to close shortly thereafter."

R&H, the embattled VFX company that handled the majority of the Oscar-winning effects on Life of Pi, filed for chapter 11 bankruptcy protection Feb. 13 and has been working toward a quick sale of the company.

Financial advisory firm Houlihan Lokey, led by director Peter S. Fishman, was hired last month to serve as lead financial advisor in the sale of the company. Bob Baradaran and Brian L. Davidoff of Greenberg Glusker serve as legal counsel.

Just prior to the approval of the auction by the bankruptcy court, the Committee of Unsecured Creditors submitted a filing that questioned the loans that have been allowed to keep R&H in operation and also the proposed auction, saying that liquidation might be a better approach to the recovery of creditors' money.

A bankruptcy judge had previously approved $17 million in loans from Universal and Fox, integral to keeping the VFX house operating for the next few months 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. A judge approved an additional $4.9 million in financing that Legendary Pictures would pay Rhythm & Hues for the completion of VFX work on its movie Seventh Son for Warner Bros.

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