LONDON — Redbus mogul Cliff Stanford has filed a lawsuit against Germany’s Helkon Media for failing to pay $8 million owed from its acquisition of a 51% stake in Redbus Film Distribution last year.
Stanford claims that Helkon has paid only half of the first $16 million installment, which was due last October.
With his lawsuit, Stanford is seeking immediate payment of the outstanding $8 million, plus unspecified damages to compensate for resulting financial problems of Filmgroup, RFD’s parent company, which sold the stake to Helkon.
At the time of the transaction, Filmgroup, which is developing a video-on-demand service, was valued at around £25 million ($36 million), according to Stanford.
But without the $8 million cash injection from the Helkon deal, the company is now “effectively bankrupt,” he said.
But by taking the formal step of legal action, Stanford has freed Filmgroup to explore alternative re-financing routes through Stanford’s own investment company, Redbus Group, instead of just waiting around for payment from Helkon.
The dispute is certain to fuel widespread speculation about the state of Helkon’s finances. Company is also known to be behind on payments for films from at least one major supplier.
Helkon toppers did not return calls for comment.
Nonetheless, the dispute does not directly affect the operations of RFD. That’s because the $8 million tranche already paid by Helkon was largely injected into the U.K. distrib, whereas the unpaid $8 million was destined for Filmgroup.
RFD chief exec Simon Franks claimed no knowledge of the suit or any problems over the payment. Franks is also a founder of and shareholder in Filmgroup, in whose name the action is being taken.
RFD and Helkon are now closely intertwined, buying pics together for the U.K. and Germany. The U.K. distrib was active at the recent American Film Market, picking up “The Hunted” and “The Mothman Prophecies” from Lakeshore.
Stanford said he decided to take legal action after finally losing patience with repeated promises from cash-strapped Helkon that it was about to raise the necessary financing to repay the debt. Most recently, Helkon pledged to pay by Feb. 27, but failed to do so.
Sources said that Helkon was originally planning to fund the deal by issuing a fresh round of equity on Germany’s Neuer Markt. But that became impossible after the company’s stock price crashed following the sudden death of Helkon topper Werner Koenig last November.
A report by Merrill Lynch last November estimated that Helkon had less than $6 million in the bank from the $57 million raised at its IPO in 1999.
Helkon still has more to pay in the future for its 51% stake in RFD, although it is unclear how much and when. The complex deal valued the U.K. distrib at $58 million, but that included the cash injections.