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The Weinstein Co. is now seeking the protection of bankruptcy court. The announcement of the filing marks the latest turn in a stunning fall for the prestigious indie studio responsible for many award-winning films, but now embroiled in a transformative controversy thanks to several dozen women who have come forward in recent months to publicly accuse Harvey Weinstein of rampant sexual misconduct.
The bankruptcy petition in Delaware will position Lantern Asset Management as the stalking horse bidder for Weinstein Co. assets after coming to a purchase agreement. Other companies will be able to bid at an auction after a bankruptcy judge reviews the bidding procedure and any objections.
“While we had hoped to reach a sale out of court, the Board is pleased to have a plan for maximizing the value of its assets, preserving as many jobs as possible and pursuing justice for any victims,” chairman Bob Weinstein said Monday in a statement.
Texas-based Lantern was previously part of the Ron Burkle-Maria Contreras-Sweet bid to buy the company that was scuttled last month.
“We are honored to be selected as the bidder to acquire the company’s businesses as an ongoing concern,” stated Lantern co-founders Andy Mitchell and Milos Brajovic. “In the last several months, Lantern has evaluated the company and is proud to provide a solution to the board.”
Since bombshell news reports in October first detailed how Harvey Weinstein abused his power by luring women under the guise of career opportunity and allegedly assaulting many of them, TWC has attempted to survive in the midst of a growing #MeToo movement. On Oct. 8, Weinstein was fired from the studio he co-founded with brother Bob. But that hasn’t been enough to save the company from facing tough questions over whether its board members facilitated unlawful behavior.
The bankruptcy filing for the producer of such films as Silver Linings Playbook, Django Unchained and Lion and television fare including Project Runway comes after TWC pursued a sale outside of the bankruptcy process to save the jobs of some 150 individuals and salvage some of its reputation. After seeking bridge loans from private equity firms, TWC closed in on a transaction with an investor group led by Maria Contreras-Sweet promising a female-run studio that wouldn’t simply sell off the company’s nearly 300-film library.
But the deal was scuttled when New York State Attorney General Eric Schneiderman brought a wide-ranging lawsuit alleging violations of civil rights, human rights and business laws. The complaint in New York state court alleges complicity by Harvey Weinstein’s business partners and demands financial penalties and restitution for victims. TWC then attempted to salvage the deal by firing its chief operating officer, David Glasser, but couldn’t come to an agreement to satisfy everyone.
A Chapter 11 filing provides immediate relief in the form of pausing pending civil matters, including Schneiderman’s lawsuit and also the handful of other cases now being pursued by others. To pay off substantial debts, TWC will now look towards an auction. Bidders could be comforted by the idea that assets may be sold free and clear of claims and encumbrances — while those suing the company will be regarded as unsecured creditors. The prospect was enough that in advance of the bankruptcy, Schneiderman’s office urged TWC management to release employees from non-disclosure agreements. In an announcement, TWC said it will indeed release Harvey Weinstein’s victims from confidentiality obligations. According to a spokesperson, “No one should be afraid to speak out or coerced to stay quiet.”
According to the filing, TWC has between 200-999 creditors and $500 million to $1 billion in assets and estimated liabilities. Among its top creditors with the 30 largest unsecured claimes are Wanda Pictures ($14.4M), Viacom ($5.6M) and Sony ($3.7M). Attorneys from top law firms including Boies, Schiller & Flexner, O’Melveny & Myers and Greenberg Glusker are also owed millions.
Robert Del Genio and Luke Schaeffer are appointed Chief Restructuring Officer and Chief Strategy Officer, respectively.
The bankruptcy won’t mean an end to troubles for Weinstein and those on the company’s board.
Creditors including those in the entertainment industry who are owed residual payments plus female accusers and investors will likely push a broad investigation into Weinstein’s conduct and any dishonesty and incompetence that contributed to the debtor’s downfall. If the court authorizes a trustee, this individual could seek to initiate an adversary proceeding to pin liability on the Weinsteins and recover money for the benefit of the debtors’ estate. Meanwhile, Harvey Weinstein himself is currently involved in an arbitration over his firing and, as a stakeholder, he could pursue his own claims during the course of the bankruptcy.
Of course, with the possibility of criminal cases to be pursued against Weinstein, other events could overtake bankruptcy in the priority line. As of today, though, law enforcement authorities haven’t filed charges despite active investigations and referrals.
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