2:42pm PT by Eriq Gardner
Gold Circle Films Owes $14M to Hedge Fund, Judge Rules
Following a trial that reviewed the financial history of Gold Circle Films, responsible for such films as My Big Fat Greek Wedding and the Pitch Perfect series, a New York judge has ruled that the production company owes $14.1 million to an entity controlled by the hedge fund Sandton Capital Partners.
To fuel its growth more than a decade ago, Gold Circle took out about $76 million in loans, and as the maturity default date approached on some of that, the lender CIT Bank grew disenchanted with the film company's leadership. To get the loan amount off its books, CIT Bank sold the loans to Sandton, likely at a distressed price.
At the time, before Pitch Perfect hit it big by reaping hundreds of millions in gross receipts, Gold Circle claimed it couldn't repay.
For several years now, Sandton has been pursuing the debt in court.
One of the issues was that the loan was technically taken out by Gold Circle Finance, a shell company that acted as a finance arm for the parent company.
But that doesn't matter, rules New York Supreme Court Judge Barry Ostrager.
"In short, the case is not nearly so complicated as the Gold Circle parties wish to make it," he writes in a post-trial decision. "Manifestly, no lender would lend tens of millions of dollars to a subsidiary shell corporation without a guarantee from a revenue producing parent, in this case Gold Circle Films. There is a guarantee in this case... ."
The other big issue in the case was whether Sandton had allowed the statute of limitations to run out.
Gold Circle claimed it was insolvent by 2010 and that meant that the six-year window for bringing a claim ran from the time it couldn't pay its debts.
Ostrager agrees with Sandton that the clock really started upon the maturity default in November 2011 — making Sandton's suit in May 2017 just under the wire. The judge adds, "No notice [of default] was sent prior to November 27, 2011 accelerating the maturity date of the Loan by reason of the curable defaults."
Given resolution to these issues, the only other big item to be determined was the amount owed, and while the judge disagrees with Sandton that compound interest applies, it accepts the calculation of its expert that $14,112,679 is owed instead of about $5.7 million that Gold Circle asserted.
Says Mathew Rosengart, attorney for Sandton, "We are gratified, after years of litigation and a trial, by Justice Ostrager’s well-reasoned and thoughtful decision."