3:51pm PT by Ashley Cullins
The Weinstein Co. Dodges Asset Freeze Amid Legal Fight
The Weinstein Co. is free to sell off its assets if it so chooses, following Harvey Weinstein's sexual assault and harassment accusations and subsequent ouster from the company that bears his name, a California bankruptcy judge ruled Tuesday.
Earlier this month, a trustee for Steve Bannon's bankrupt company Genius Products told the court TWC's only realistic options are a fire sale of its assets or a bankruptcy filing. Alfred Siegel is currently suing the distributor for $130 million and is "extremely concerned" that Genius won't recoup money it is owed if TWC is allowed to sell off parts to stay afloat.
Meanwhile, in a Nov. 17 opposition filing, TWC called the request "Draconian" and argued there is no basis for the relief. "The Trustee — on behalf of a $10 million creditor pool pursuing a $130,000,000 windfall recovery — seeks to severely disrupt Defendants’ business by imposing a far-reaching preliminary injunction barring Defendants 'from using, transferring, encumbering, or otherwise disposing of Weinstein’s respective assets, debt, or equity interests outside the ordinary course of business without the Trustee’s consent or further Order of this Court,'" writes Alan R. Friedman.
TWC argues that any harm to Genius absent the freeze is speculative at best, but, if the court were to grant the request, the distributor's ability to conduct business would be severely harmed by a requirement that it seek court approval before entering any significant agreement or transaction.
"The uncertainty this would create and the time required for a motion for approval to be prepared and resolved will itself create a severe hardship for TWC, whose competitors are not burdened with the same restrictions," writes Friedman. "Moreover, the risk that the terms of such agreements may become public through court-filed documents would place TWC at an additional competitive disadvantage, as TWC’s competitors are not burdened by this risk and industry deals typically are kept confidential."
Ahead of a Tuesday afternoon hearing, judge Sheri Bluebond issued a tentative ruling that indicated she would deny the request, and she stuck by the decision after arguments.
"I'm prepared to conclude there are financial problems at The Weinstein Co.," Bluebond said, adding that it wouldn't be a bad idea for the company — and Weinstein personally — to consider filing bankruptcy. But she doesn't consider Genius' situation to be so dire that it warrants her issuing an injunction that keeps the distributor from selling assets.
In fact, the judge proposed that many of TWC's creditors may be happier receiving cash from asset sales than the assets themselves — and she noted that any such sales would be executed under a microscope, reducing the chance of unfair deals. "I don’t think they can blow their nose without somebody wanting to know about it now," she said. "No one in their right mind is going to do a transaction with them without realizing that it’s going to be scrutinized after the fact."
Bluebond also argued that in this matter preserving the status quo doesn't seem ideal for anyone — especially TWC. “The status quo is rotten," she said. "They’ve got to do something to change the status quo at this point or it's curtains for them.”