UPDATE: Inferno’s Bill Johnson forwarded a press release which better explains why the company filed Chapter 11. According to the release, the company can continue to do business unimpeded, and the move was to protect part of the company from a judgment involving the 2005 film Just Friends. Release is below story.
EARLIER, 8:02 PM: The fall festivals, including the Toronto Film Festival, are filled with so much promise of films that are up for grabs for distributors, producers and financiers. It is important to proceed in a sober fashion. The Wall Street Journal reports that Inferno, one of the hot new production and financing companies, has filed Chapter 11. They helped finance the Brad Pitt-starrer Killing Them Softly, which was directed by Chopper helmer Andrew Dominik. Inferno explains they are sorting things out, but this makes you respect the companies like Sony Pictures Classics, which manage to proceed at a slow but steady pace, year after year, running it like a business, squeezing every dollar out of the films they distribute, and not over reaching like so many upstart companies seem to do. I’d hoped that Inferno would earn a place at the table as a viable new player, but this certainly doesn’t help. Chapter 11 is by no means fatal, but it is serious.
On Friday, August 24, 2012, Inferno Distribution, LLC and Inferno International, LLC commenced Chapter 11 cases in Los Angeles California to allow them to continue to operate those businesses while restructuring their obligations. While business and prospects remain strong for those entities, in late 2011 a large judgment was entered against Distribution and International related to the 2005 film Just Friends, on which Distribution acted as foreign sales agent. The central issue in the case is who was responsible for financial losses when a producer of the film who was hired by a German tax fund, not by Distribution or International, absconded with millions of dollars received from Canadian tax credits. Both Distribution and International strongly disagree with the Court’s ruling and have appealed. The filings were necessary to protect the value of the companies and to restructure operations in those entities while the appeal can be decided.
These cases do not affect any other entities, including Inferno Films and Inferno Features, which did not file for Chapter 11 protection. Both Distribution and International will continue to operate while under the Chapter 11 protection for the benefit of all interested parties.