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A holding company associated with Prana Studios submitted the winning bid to acquire visual effects studio Rhythm & Hues at a bankruptcy auction that started Wednesday morning at the offices of its reorganization counsel, Greenberg Glusker.
A court hearing on confirmation of the winning bidder is scheduled for 10 a.m. Friday.
Prana Studios is a VFX and animation studio with bases in Los Angeles and Mumbai. It is currently providing animation for Disney’s upcoming 3D feature Planes.
Other bidders in the auction included India’s Prime Focus; a Chinese entity involving Jiang Yanmin, president of China Lion (and a founder of Technicolor Beijing); and bicoastal animation company Psyop.
The R&H bankruptcy auction was not without twists. Just Thursday morning, South Korea’s JS Communications filed a conditional objection in connection with the auction. JS had pulled out of being the stalking-horse bidder after it missed its court-mandated deadline of March 19 to execute a binding asset sale and purchase agreement in connection with its stalking horse bid.
But in Thursday morning’s filing, the company argued that the R&H has “invited bids that improperly violate this court’s procedures order so as to deny JS its court-approved breakup fee.”
Specifically, it cited the court order that all bids increase the cash component by at least $525,000, so as to trigger and fund the $425,000 breakup fee. The document said: “This court should not tolerate such a shell game.”
Since filing for bankruptcy, R&H — the company behind the majority of the Oscar-winning VFX in Life of Pi — has continued to operate thanks to $17 million in loans from Universal and Fox enabling the studio to continue 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.
Also keeping R&H going is $5 million in financing from Legendary, which will pay R&H for the completion of VFX work on their movie, Seventh Son, which Warner Bros. plans to release Oct. 18. R&H is a co-investor/co-producer on this film.
R&H filed for chapter 11 bankruptcy protection Feb. 13, not long before the Academy Awards — and its impact was immediately felt far beyond Hollywood as it drew global attention to the troubled VFX business climate.
It also served as a catalyst for the VFX community to mobilize to bring attention to discuss the issues — including globalization and subsidies — that are causing the challenges. It even prompted a demonstration on Hollywood Boulevard on Oscar Sunday, attended by nearly 500 from the community.
There is not a clear consensus on how best to address the business challenges; talk of unionizing and forming a trade association are both being discussed.
In 2012, Digital Domain filed for bankruptcy protection, and its VFX business was acquired by China’s Galloping Horse and India’s Reliance MediaWorks for $30.2 million.
The pressures of the VFX business have caused other companies — including Asylum, Cafe FX, and The Orphanage — to close their doors in recent years.
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