The Weinstein Co. is reviving its attempts to sell itself or the bulk of its film and television assets, Variety has learned. But the clock is ticking. The company was on the verge of bankruptcy last week, but after selling domestic distribution rights to “Paddington 2” in a $28 million deal with Warner Bros. it has bought itself some time. With the money, it now has enough cash to meet its payroll obligations, but it doesn’t have as much of a financial cushion as it would seem. That’s because The Weinstein Co. only receives a percentage of the money. Canal Plus, the film’s producer, picks up $20 million, while the Weinstein Co. gets the remaining $8 million.
The indie studio has been hit hard by a sexual harassment scandal involving co-founder Harvey Weinstein. It has already borrowed hundreds of millions against its film and TV library and now is grappling with the fact that its brand has become radioactive after dozens of women accused Weinstein of assault or unwanted sexual advances.
Weinstein Co. board members Lance Maerov and Tarak Ben Ammar have been handling the negotiations with banks and lenders, as the company assesses whether or not to dissolve, reorganize, or try to sell itself in pieces. Even though the “Paddington 2” sale may have alleviated some liquidity issues, there’s legal pressure accelerating the process. On Nov. 10, AI International Holdings, part of investor Len Blavatnik’s empire, filed a lawsuit in New York Supreme Court, claiming that the Weinstein Co. had defaulted on a $45 million loan. It is demanding that the studio repay the loan immediately. A hearing is scheduled for Dec. 13.
In a move to restart a sales process that had stalled out, L.A. investment bank Moelis & Co. has been reaching out to companies and entities that had expressed interest in the Weinstein Co. in the past. It has begun sending financial materials to potential bidders. Moelis & Co. is trying to find a stalking horse bidder, so far without much success. Part of the issue is that the company is carrying a substantial debt load and potential bidders who have looked at buying parts of the library or upcoming films say its books are a mess.
The studio does have a library of film titles that includes Oscar winners such as “The King’s Speech,” “Django Unchained,” and “The Artist,” and has rights to the “Project Runway” television franchise. However, those assets are heavily leveraged, having been borrowed against several times. Many bidders still think the company will be forced to file for bankruptcy protection or will liquidate.
The Blavatnik suit could add to Weinstein’s miseries. Soon after the initial New York Times’ expose on Weinstein’s sexual misdeeds and crimes was published, on Oct. 5, Weinstein lost his job, his marriage and his professional standing. He still has his freedom and his wealth, but he could be stripped of those as well.
The Blavatnik litigation was aimed both at the Weinstein Co. and at Weinstein personally. According to the suit, Weinstein signed a personal guarantee for the $45 million loan.
Should the Weinstein Co. opt to go into bankruptcy, that would freeze the litigation against the company. But the litigation against Weinstein would continue.
“There’s nothing a bankruptcy of the company will do to impact the lender’s ability to pursue claims against the guarantor,” says Keith Owens, a bankruptcy lawyer at Venable LLP. If they choose to be aggressive about it, Blavatnik’s attorneys could go after Weinstein’s assets by, for example, putting a lien on his house.
“If the corporate debtor files for bankruptcy, they want to have a non-bankrupt entity to go after,” says Roger Friedman, a bankruptcy lawyer at Rutan & Tucker. “If they get a judgment on the guarantee, they can then execute their judgment against his personal assets.”
Weinstein’s representatives declined to comment. The Weinstein Company did not immediately comment. Blavatnik’s attorneys did not respond to a call seeking comment.