4:48am PT by Eriq Gardner
Weinstein Co. Bankruptcy: Grim Last Days for Troubled Studio Outlined in Court
Business partners who refused to return calls. A fleeing work staff. No in-house lawyers. Not even enough money to continue an investigation into the Harvey Weinstein imbroglio.
Robert Del Genio, chief restructuring officer at The Weinstein Co., went into detail about the embattled studio's terrifyingly dire situation in a statement filed in Delaware Bankruptcy Court on Tuesday morning.
Obviously, articles in The New York Times and The New Yorker about Harvey Weinstein's sexual misconduct left the company reeling. Now revealing the full extent of those troubles, Del Genio says the debtor was left with just $500,000 cash in hand by the time it filed for Chapter 11. The bankruptcy papers provide a deep look at the company's revenue, and debt and also showcase how Lantern Asset Management is coming in with a $310 million stalking horse bid to acquire the debtor's assets despite a last-minute offer from someone else.
According to Del Genio, TWC has 277 films in its library, which will generate $151 million in net cash flow this year. The studio also has a successful television business with series like Project Runway and Peaky Blinders that is expected to reap $255 million in total revenue and $52 million in profit this year.
That's the upside. Here's the trouble...
TWC is indebted to Union Bank, Bank of America and other secured creditors to the tune of $156 million. Project Runway and other titles are being used as collateral. Unsecured creditors include 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. About a quarter of its workforce has departed, but 85 full-time employees and 12 independent contractors still remain. Last year, TWC had total overhead of $41.2 million, including $21 million going to salary.
Then there's the fallout from an October story titled, "Harvey Weinstein Paid Off Sexual Harassment Accusers for Decades."
"To date, more than 80 women have stepped forward to accuse Harvey Weinstein — a man whose name is eponymous with TWC — of sexual harassment, assault or rape," states Del Genio. "There have been numerous news reports, articles, opinion pieces, blog posts and even a television special concerning their accusations. Allegations have been reported worldwide, prompting police departments in both the United States and the United Kingdom to open investigations and sparking the international #metoo and Time’s Up campaigns."
Weinstein has been fired and has been fighting his termination in arbitration. TWC has suffered aborted relationships with Apple, Ketchum, Amazon and others, while stars including Channing Tatum, Quentin Tarantino and Lin-Manuel Miranda are distancing themselves. They are not alone. A majority of its board members have departed, with only three remaining: Lance Maerov, Tarak Ben Ammar and Bob Weinstein.
"Even longstanding business partners have refused to return the Company’s phone calls," Del Genio tells the judge. "Average weekly receipts dropped from $2 million at the end of September 2017 to $150,000 the week before the Petition Date."
Del Genio recounts other reported events in the past few months from the negotiations with Tom Barrack Jr.'s Colony Capital last autumn to the near sale to an investor group led by Maria Contreras-Sweet. TWC has also received some lifeline cash by selling off titles such as Paddington 2 and The Six Billion Dollar Man.
Now, Union Bank is providing debtor-in-possession financing of up to $25 million with $7.5 million advanced. The plan envisions a rather speedy auction process with court approval of bidding procedures in the next 35 days, an auction within 60 days thereafter and the completion of the sale just 10 days after that.
Texas-based Lantern will be the stalking horse bidder with a $310 million cash offer and the assumption of project-related debt. "Additionally, Lantern Capital’s proposal indicated an interest to maintain the Company’s business intact as a going concern and to offer employment to most of the Company’s employees," highlights Del Genio.
The restructuring officer also reveals that a last-second offer came from some other entity.
"On March 8, 2018, the Company received one additional proposal to acquire substantially all of the Company’s assets from another interested bidder," he states. "However, this proposal included a lower cash purchase price and additional conditions precedent relating to third-party consents from the Company’s business partners. The Board held a telephonic meeting to evaluate and discuss the proposals. The Board determined that the offer from Lantern Capital represented the greatest value to the Company and its stakeholders and the greatest closing certainty."
More troubles beckon as creditors line up and a potential push is made to investigate any dishonesty and incompetence that contributed to the debtor's downfall.
The bankruptcy will pause pending lawsuits against TWC, but perhaps not all of them. A huge fight could be brewing with New York State Attorney General Eric Schneiderman, who in February 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. Schneiderman's office insists to The Hollywood Reporter that as a law enforcement entity, this civil rights lawsuit won't be stayed. As the debtor looks to sell everything free and clear of claims and encumbrances, Schneiderman's legal efforts could impact everything.