UPDATE, 5:25PM: A federal bankruptcy court today approved JS Communications’ stalking horse bid for the financially troubled Rhythm & Hues. With the South Korean media company now firmly in place to bid on the company, the auction process out of Chapter 11 will begin. If no other bidders put their name in the hat, the VFX house will belong to JS Communications by the end of the month. However, court documents show that several other parties have expressed interest in Rhythm & Hues but JS is the only one to have their name made pubic. The court also ordered Friday that JS would receive a $425,000 break-up fee if another bidder buys R&H. That’s $250,000 less than the $675,000 the company wanted. Additionally the court said that the utilities cannot be turned off at R&H’s HQ and the company can pay pre-bankruptcy wages due to execs Prashant Buyyala, Keith Goldfarb and John Hughes if it chooses.
PREVIOUSLY, 10:26 AM: JS Communications Co wants a judge today to give it stalking horse status in bids for the assets of bankrupt VFX house Rhythm & Hues. In a letter of intent dated Thursday and signed by Managing Partner David Shim, the South Korean media company says it wants to acquire the Oscar winning company by the end of the month. “We are prepared to proceed with our due diligence and negotiate a Definitive Agreement as soon as possible,” says JS Communications’ letter. However, the Korean company insists it will only proceed with its bid if it is officially given the stalking horse status in Bankruptcy court Friday. Stalking horse bidders serve to spur other potential buyers to stake out more competitive positions in a court mandated auction process. The El Segundo-based effects studio, which won an Oscar last month for Life Of Pi after laying off 250 workers and seeking bankruptcy protection tapped investment firm Houlihan Lokey Capitol Houlihan Lokey in February to manage a sale. “Several interested parties,” according to a document submitted to the court by the investment firm, have stepped forward but JS is the only company to publicly do so. If successful in its bid, JS Communications would not only take over the assets of R&H but also the $17 million extension loan the effects house obtained from Universal Studios and 20th Century Fox to keep going in the short term. If another bidder wins the auction, JS have insisted on getting a $675,000 break-up fee. A move more than likely made to ensure that their competition is slight. If a sale does not come together by March 29, the VFX house says they will be unable to offset overhead costs and maintain staff necessary to secure and execute new work. That’s when it could really be over for Rhythm & Hues
RELATED: Visual Effects Society Calls For Inaugural VFX Congress, Larger Tax Incentives