"It was an opportunity for the studios to clean house in a way that was startling," says Goldsman of the force majeure sweep during the strike.
GABRIEL BOUYS/AFP/Getty ImagesWhen Harvey Weinstein’s former studio filed for bankruptcy in March, there were three big mysteries: Who would buy assets once belonging to The Weinstein Co.? What would actually be sold? Where would the proceeds go?
Settling the first question, Lantern Capital emerged as the winner of an auction with a $310 million bid. Many former TWC partners, however, are still objecting to the assumption of assets. Thus, the second question remains unsettled. Now comes some controversy over that third question.
On Monday, the Directors Guild of America, the Screen Actors Guild-American Federation of Television and Radio Artists and the Writers Guild of America filed suit against MUFG Union Bank.
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According to the guilds, massive residual payments are owed to directors, performers, and writers from Weinstein Co. films under collective bargaining agreements. The Asset Purchase Agreement earmarks $8 million for residual claims, but the guilds have taken an initial audit and see much more as being owed. For example, based on incomplete information, the guilds say they have identified over $12 million in unpaid residuals over sample titles from July 2008 to December 2012.
So now in an adversary proceeding brought in Delaware bankruptcy court, the guilds are targetting Union Bank, which was one of TWC’s biggest lenders and is scheduled to collect $175 million of proceeds from the $310 million sale of the debtor’s assets. That means that $135 million is left to divide among all creditors other than Union Bank, and the guilds express their suspicion that the actual distributable amount may prove less than half of that projected figure.
With creditors ranging from producers and distributors to talent agencies and alleged victims of Weinstein, the guilds are now attempting to show that they belong ahead of Union Bank in the priority line.
The guilds say they hold valid and perfected security interests in certain motion picture rights. As does Union Bank, but the guilds note the difference.
“Upon information and belief, the Debtors did not grant Union Bank a security interest in all rights and proceeds for each Common Picture,” states the complaint. “Instead, Union Bank holds security interests pertaining only to domestic film rights: i.e., Union Bank is not generally secured in rights and proceeds relating to exploitation of Common Pictures outside of North America. In contrast, there is no such territorial limitation in the collateral base for Guild security interests. Upon information and belief, this differential in collateral value may be substantial. By way of example, data recently published by the Motion Picture Association of America indicates that less than 37% of the value of theatrical motion pictures produced by MPAA members comes from domestic exploitation.”
The guilds also say that Union Bank collateral for certain films is “further diminished through exclusion of rights and proceeds pertaining to the home entertainment market,” flexing their muscles by pointing how their own security interests isn’t limited in this way.
The lawsuit seeks a declaratory judgment that the guilds hold valid, senior and enforceable security interests in applicable motion pictures and that, therefore, the bank must disgorge all sale proceeds received.
The guilds aren’t the only ones suing Union Bank over proceeds from the Weinstein Co. asset sale. AI International Holdings, which has a $46 million secured claim, has also brought an adversary proceeding.
“Harvey Weinstein established a veritable labyrinth of companies to run his production business,” states AI’s complaint. “Following reports of his sexual misconduct, the production business collapsed, and the companies filed bankruptcy. The Debtors had incurred loans secured by their assets. There was no single lender with a senior lien on substantially all assets of the Weinstein companies. Rather, the Debtors had taken loans secured by various pools of assets, which included intellectual property, rights under distribution agreements, and equity in subsidiaries. The Defendants, for example, have liens only upon the assets of one of the Debtors, TWC Domestic LLC.”
