Weinstein Co. Saga: Did Colony Pull Plug on Cash Infusion?

Bloomberg
Colony Capital's Tom Barrack

If Colony recedes from the TWC mix, other suitors in the hunt for a distressed asset await, including Fortress Investment Group and Vine Alternative Investments.

With one week remaining on its exclusive negotiating window, is Colony Capital pulling the plug on its cash infusion for The Weinstein Co.?

Earlier Wednesday, sources familiar with the negotiations told The Hollywood Reporter there was a 50-50 chance that Thomas Barrack’s Colony would buy all or part of the troubled studio founded by Harvey and Bob Weinstein. But a deal appears to be in jeopardy, with Colony saying it has rescinded its preliminary agreement to provide a lifeline to the studio rocked by allegations that Harvey Weinstein sexual harassed and assaulted 50-plus women over a three-decade span.

A Weinstein Co. source denies that Colony is pulling its cash infusion and claims that a New York Times report floating the news is a negotiating tactic. Others familiar with the negotiations say that Colony was not sufficiently impressed with TWC's assets to infuse it with cash and executives there are comfortable with the prospect of revisiting their strategy should TWC declare bankruptcy. 

With Colony potentially receding from the TWC mix, other suitors in the hunt for a distressed asset await, including Fortress Investment Group and Vine Alternative Investments, which acquired controlling interest in Village Roadshow in April. At this point, only Colony has had access to TWC’s balance sheet, and it is unclear what Barrack has found upon closer inspection.

In 2016, Harvey Weinstein told THR that the 12-year-old company had 515 films in its library. In reality, TWC has an economic interest in far fewer titles, owning only the films released after summer 2010, including Silver Linings Playbook, The Hateful Eight and last year’s Lion. Furthermore, those titles are encumbered by bank debt. TWC previously had sold off its position in the library of titles from 2005-12 to Goldman Sachs, which in turn sold 50 percent of that asset to AMC and 50 percent to insurance company Assured Guarantee in 2015.

TWC owns a number of TV shows in development. There are also several upcoming films in TWC’s portfolio, including Paddington 2, Polaroid, War With Grandpa, The Current War and Hotel Mumbai, all due to be released in next 12 months. The book division is said to have a minimal value.

The board of directors would like to sell TWC as one entity rather than piecemeal, with the former option likely fetching more money than the latter. A board source says that either way, current shareholders will not get out what they put in and will “take a significant haircut.”

One of the key questions surrounding a sale vs. the prospect of prepackaged bankruptcy, a prospect that Colony is floating, is how much legal exposure TWC will face, with the first company-aimed suit being filed Wednesday in the wake of revelations of Harvey Weinstein’s harassment and assault claims. Another question is whether it can hold on to its key employees.

“You’ve got clearly an asset that has already been played out in the theaters and increasingly on the smaller screen,” says analyst Hal Vogel. “To give the asset value, you have to produce new material, and the production of new material is much more expensive than it used to be because you have new players like Netflix, Amazon and Hulu driving up the costs.”

He adds: “The argument is that TWC’s TV business might have value. I’m skeptical of that because it’s mostly reality TV. The fashions in favor in 2018 might not be in 2019. That leaves us with the feature film business and scripted TV, which would be hard enough for a company that hasn’t been tarnished as much as [TWC] has been.”

Paul Bond contributed to this report. 

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