Fed up with no response to repeated deadline extensions on demands for payments, angry creditors filed a request to put NSB Corp., the former Hemdale Film Corp., into default yesterday.
The request was filed before U.S. Bankruptcy Judge Kathleen Lax in Los Angeles.
Also filed by the attorneys representing the creditors was a proposed order to declare that default valid.
Should Lax file the order, NSB would officially be in a Chapter 7 bankruptcy.
At that time, it would have to seek to convert the Chapter 7 status, which calls for liquidating its assets, to Chapter 11, which calls for reorganization or fold shop.
The creditors, which include the three Hollywood guilds and such talent as director James Cameron and producer Gale Anne Hurd, filed an involuntary Chapter 7 bankruptcy petition against the company Sept. 7.
The creditors involved in that petition are reportedly owed a combined $ 43.3 million.
On top of that, NSB reportedly owes its lenders an estimated $ 80-to-$ 100 million in bank debt. But sources familiar with the company’s predicament say it was its key lender Credit Lyonnais which stalled on paying the creditors’ demands. Bank officials couldn’t be reached late yesterday.
After the creditors filed the involuntary petition last month, NSB was given until Oct. 14 to pay off the debt or convert to a Chapter 11.
That deadline was extended to Oct. 22, but when NSB failed to meet the second deadline, the creditors’ attorneys Stephen Chrystie and David Stern filed the default request.
“We are at a loss why NSB didn’t file a timely response even though we gave them several extensions,” said Chrystie. It has been speculated in the past that the creditors may request the court to appoint an independent trustee to either manage the company’s liquidation or reorganization.
“The company is fully aware that this action was going to happen and we’re going to have to take an appropriate response,” said Rene Rousselet, NSB’s senior VP of finance. “We haven’t made any decision just yet” on whether the company will convert to a Chapter 11.
Rousselet would not discuss the company’s terminated relationship with its former counsel on the case, Levine and Eisenberg, except to say: “We’re still negotiating with several lawyers to determine who will represent the company at this point.”
He emphasized the bankruptcy does not affect affiliated companies Hemdale Home Video and Hemdale Pictures Corp.