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The Weinstein Co. is attempting to move heaven and earth to avoid a bankruptcy, but pressures continue to mount. Just as TWC’s board is set to meet today with New York Attorney General Eric Schneiderman in an attempt to plead the case for a sale, Canadian distributor eOne has appeared in court and is demanding that a California federal judge effectively place a lien on the company to ensure that assets are not dissipated.
An investor group headed by Maria Contreras-Sweet and backed by billionaire Ron Burkle was set to buy TWC for about $500 million when Schneiderman filed a wide-ranging lawsuit on Feb. 11 alleging that company executives repeatedly failed to protect employees from Harvey Weinstein’s “unrelenting sexual harassment, intimidation and discrimination.”
Schneiderman insisted that a good portion of any money from a sale go to Harvey Weinstein victims, not those who allegedly facilitated sexual misconduct.
That move temporarily scuttled the deal, but since the filing of the lawsuit, TWC’s board fired David Glasser as president and chief operating officer. Glasser is now planning an $85 million wrongful termination lawsuit.
With Glasser gone, TWC may have hopes of salvaging the Contreras-Sweet buyout, but now comes a potential new obstacle from eOne.
The Canadian distributor sued TWC earlier this month for offloading the commercial smash Paddington 2 before eOne had the opportunity to bring it to theaters. After TWC sold Paddington 2 rights to Warner Bros., eOne terminated an output agreement and now alleges the termination triggered repayment of a master advance within five days. The balance is $7.2 million owed.
According to eOne’s court documents, TWC executives haven’t disputed the amount and are using the monetary advance to continue operating.
“TWC executives have essentially admitted that the company is insolvent,” states an ex parte application for writs of attachment, adding that TWC is not paying debts “despite admitting that they are due.”
Martin Katz, attorney for eOne, recounted to the judge all of the developments related to Harvey Weinstein’s sexual escapades and Schneiderman’s lawsuit while pointing to “speculation” that the termination of Glasser means the sale of TWC is back on track. And if the sale doesn’t happen, Katz notes that TWC could file bankruptcy, with nods to how TWC executives have privately told eOne as much.
This all adds up to an exigent situation, eOne says.
“Irrespective of the twist and turns it may take, the TWC quagmire poses substantial and immediate risks of irreparable injury to eOne,” states the application in federal court. “If Defendants sell their assets, there is no assurance that there will be funds available set aside from the payout or committed by the buyer to pay eOne the substantial amount it is owed. If Defendants settle with other third-party claimants, … they may not have sufficient funds remaining to pay eOne. If Defendants continue to operate as they have been operating, their resources will become further impaired and, again, they may not have sufficient funds remaining to pay eOne. And, if Defendants file for bankruptcy more than ninety days down the road, and eOne has not obtained a writ of attachment, its claim will be substantially impaired, if not extinguished.”
If eOne succeeds in its application — and the judge’s decision to grant or deny will likely be coming in the next 72 hours — TWC would be prohibited from dissipating assets without eOne gaining satisfaction. If TWC declared bankruptcy more than three months hence under this scenario, eOne would become a secured creditor. But if TWC filed for bankruptcy sooner — an increasingly likely option — any attachment lien would terminate, and as an unsecured creditor, eOne would be in no better position than the others who would surely line up with claims against the debtor.
TWC faces other lawsuits (see this one over a canceled Amazon series, for instance) and similar moves could be coming from others.
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