The numbers in the tangled web of The Weinstein Co.’s debts are dizzying. The first wave of documents in the company’s Chapter 11 bankruptcy filing on March 19 reveal the details of debt loads tied to numerous film and TV projects.
Some of the unreleased projects still have hope of generating a profit for a future buyer, but others are dead as a doornail.
“The Mist,” the Dimension drama that went one season and out on Spike TV (now Paramount Network) last year, has $12.4 million in outstanding obligations to Comerica Bank. The series has an SVOD pact with Netflix — probably as part of the feature film output deal Weinstein Co. struck with Netflix in 2013 — but 10 episodes of a busted series are not likely to generate much in the way of license fees. Comerica has a lien on the show’s underlying assets, but the value of “Mist” at this point is less than the debt. Herein lies an example of Weinstein Co.’s fiscal problems, notwithstanding the pressure caused by the sexual misconduct allegations against TWC co-founder Harvey Weinstein that pushed the struggling company into a death spiral last fall.
It’s not unusual for companies of TWC’s size to finance production through bank loans for so-called special-purpose entities established for a specific project. But the volume of such entities under TWC’s roof and the company’s deteriorating financial situation during the past few years means that the loans were probably made on tougher terms, industry sources said.
The more collateral TWC had to put up, the more complicated untangling all those debts will be in Chapter 11. To wit, TWC owes $45.5 million to Len Blavatnik’s Access Industries under a 2016 loan agreement. That deal came with a note that pledged equity in TWC’s film and TV companies as well as a guarantee from Harvey Weinstein. However, that guarantee came with the caveat that TWC “and certain of its subsidiaries have agreed to reimburse Harvey Weinstein if he is required to make payments on the AI note,” according to the bankruptcy filing.
The Weinstein Co. filing amounts to a checkerboard of lenders, including Comerica, Bank of America, Union Bank, First Republic Bank, Opus and East West Bank.
For the upcoming Paramount Network series “Yellowstone,” starring Kevin Costner, Weinstein Co. is on the hook to Paramount parent Viacom for $20.3 million in advances delivered in April 2017 in order to allow TWC to begin production. Those advances were secured by TWC’s distribution rights to “Yellowstone” as well as “The Mist” and the doc series “Time: The Kalief Browder Story.”
“If a lender is concerned about one of its borrowers becoming insolvent, it will try to get as much collateral as possible,” said Keith Owens, a bankruptcy expert and partner at the Los Angeles-based law firm Venable. “They may have required cross-collateralization across various (TWC) entities. It really depends on whether the secured lender feels there’s underlying value that is viable.”
One of the Weinstein Co.’s most attractive assets is Lifetime’s “Project Runway” TV franchise. The long-running fashion design competition series and its spinoffs — “Project Runway All-Stars” and “Project Runway Junior” — generate about $13 million annually for TWC in royalties and merchandising sales through the show’s pact with JCPenney. TWC has about $18 million in outstanding loans against “Project Runway,” which means the show’s survival was vital to the company’s fate. Lifetime parent A+E Networks is known to be exploring ways to acquire the property through the bankruptcy process.
With so much debt so intricately tied together, the fact that Weinstein Co. had only about $218,000 cash on hand at the time of the bankruptcy filing is chilling to its lenders. The production-related debts are to secured creditors, which means they are higher on the list of people in line to be paid back after a sale. With TWC totaling about $114 million in production debts, the banks will be elbowing past talent and others looking for checks from the company.
TWC’s Chapter 11 process is designed to allow for a quick sale to its “stalking-horse bidder,” private equity firm Lantern Capital, which has pledged to buy the assets for $310 million, including the assumption of production-related debt. But the process is also designed to be transparent and encourage bidders to come forward with richer offers, even for discreet parts of the company, such as the “Project Runway” assets, Owens said.
The other big question looming over the TWC bankruptcy process is how claims from Harvey Weinstein’s alleged abuse victims will be handled and prioritized. Given the enormous scrutiny of TWC in the wake of misconduct revelations, the judge overseeing the process will be under pressure to balance the needs of institutional creditors with those of individuals with abuse claims.
Owens predicted the judge would move to set up a trust fund to collect money to be distributed to victims. Catholic archdioceses around the country have taken that step in Chapter 11 proceedings in recent years amid sexual abuse claims against church officials.
“This is not just a pure business bankruptcy,” Owens said. “These harassment claims against Weinstein have a lot to do with the filing of this bankruptcy.”
Gene Maddaus contributed to this report.