Former American Idol producer Core Media is suing 21st Century Fox and private-equity firm Apollo Global Management over a deal to acquire Core in 2011, when the singing competition series still topped the primetime ratings. The suit, filed Monday in Los Angeles Superior Court (read it here), alleges that Apollo Global worked with Fox and Endemol to swing an “elaborate joint venture arrangement designed to strip Core of its remaining cash, transfer Core’s corporate opportunities to its competitors, and ultimately leave Core to default on its obligations to its lenders.”
“This is a case about Defendants intentionally interfering with the bargain-for contractual rights of lenders, who were owed $360 million by Core Media and its affiliates,” says the suit, filed by Core litigation trustee Peter Kravitz. “Through the formation of a joint venture that obtained ownership and control of Core, the Defendants induced Core to breach its loan agreements, and disrupted Core’s performance of the loan agreements.”
Apollo’s deal for L.A.-based Core was a highly leveraged buyout for $510 million financed by a short-term bridge loan, the jury-trial-seeking lawsuit claims. “When Core became distressed,” the suit says, “Apollo — as it has been known to do in other cases — engineered a series of complex transactions to exit Core and avoid liability for the substantial debt that it had caused Core to incur. Working together with the other Defendants in this case, Apollo set up an elaborate ‘joint venture’ arrangement designed to strip Core of its remaining cash, transfer Core’s corporate opportunities to its competitors and ultimately leave Core to default on its obligation to lenders.”
Core is seeking a jury awards along with compensatory and punitive damages. Attorneys Michael Carlinsky, Eric Winston, David Grable, Patrick Schmidt and Patrick Burns of Quinn Emanuel Urquhart & Sullivan LLP are repping Core in the case.