UPDATED: It’s coming down to the wire for bankrupt VFX house Rhythm & Hues. Today at 5 PM is the deadline Federal Court Judge Neil Bason set for interested buyers to submit qualified bids for the company ahead of a March 27 auction. I’m told at least four bidders will be entering the fray, including Prime Focus, Prana Animation, Psyop, and Rocket Science 3D, and possibly others. Korean company JS Communication this week dropped out as the court-approved stalking horse bidder, which would have guaranteed Rhythm & Hues a minimum bid at auction. That surprise hiccup sprang from recent failed talks between JS and studios Fox and Universal, which last month teamed to bail out Rhythm & Hues with a $17 million DIP loan. JS rep David Shim told Deadline the two studios were uncooperative when he asked for a non-binding handshake agreement to $60 million worth of work per year for three years to ensure Rhythm & Hues had financial lifeblood through a post-sale rebuilding phase. He also says he agreed to pay an additional $3M to cover operational costs for the company. But a source with knowledge of the talks claims Shim was asking for a binding guarantee as well as additional financial commitments, a tall order in an industry where production and release schedules for studio films are always potentially in flux.
Few can blame Shim for wanting to guarantee work from two of Rhythm & Hues’ biggest studio clients after spending more than $17 million plus additional costs to save it out of bankruptcy, and I hear other potential bidders are just as uneasy about the studios’ lack of guaranteed business. But how could Fox and Universal commit to funneling that much VFX work in advance for multiple years? Would any studio make that deal? “I realized why the VFX industry is in such dire trouble”, Shim told Deadline. “Their work arrangement [with studios] and fee schedule system is very bizarre and highly unfavorable”.
JS Communications may still enter a bid by today.