We’re finally getting some reaction, if not explanation, about the abrupt announcement last night that the board of directors of The Weinstein Company is moving the beleaguered company towards a bankruptcy filing because the cash flow derived from the sale of Paddington 2 rights to Warner Bros has run out.
The board acted because it said lead bidders Maria Contreras-Sweet, Ron Burkle and Lantern Capital did not hold true to a pledge to float cash flow. The bidders haven’t yet illuminated their position, but it seems clear: Why would they part with money after the New York Attorney General Eric Schneiderman stopped a $500 million deal from closing by filing a civil rights lawsuit, and there is no guarantee that is the last hurdle? If the bid craters, those suitors might have to line up behind other creditors in bankruptcy.
The AG’s office just issued this statement expressing disappointment in this latest development, attributed to Director of Communications and senior counsel Eric Soufer:
“Over the past two weeks, we had very productive discussions with both parties about accomplishing the Attorney General’s goals of compensating victims, protecting employees, and rooting out those who enabled years of sexual abuse at the Weinstein Company. We are disappointed that despite a clear path forward on those issues—including the buyer’s commitment to dedicate up to $90 million to victim compensation and implement gold-plated HR policies—the parties were unable to resolve their financial differences. We will continue to pursue justice for victims in the event of the company’s bankruptcy, and our investigation into the pattern of egregious abuse by Harvey Weinstein and his enablers is ongoing.”
Deadline reported last week that the deal seemed to be coming back on track after the new company agreed to raise its payment into a victims fund from $10 million to about $30 million-$40 million. Paired with insurance policies expected to contribute $60 million, that adds up to a $90 million victims fund. That would be a substantial win for an AG who filed suit because he feared his concerns were falling on deaf ears, and knew his moment had to come before the deal closed.
The ominous turn toward bankruptcy could throw everything into disarray, and possibly end that company as an ongoing concern.
Last night marked the second time that the board — led by Tarak Ben Ammar and Lance Maerov (who fired Harvey Weinstein right after the publication of articles last fall) and outgoing co-founder Bob Weinstein — dropped a late-night bombshell in the form of a terse announcement. The first came with a recent Friday night announcement they had fired COO David Glasser for cause, though they still have not explained what they meant by cause. Glasser has separately been excoriated by Schneiderman as being unfit to lead the new company for not doing more to stop Harvey Weinstein from openly bullying employees when they complained to HR. Glasser, in turn, announced that his lawyers would be filing an $85 million lawsuit against Ammar, Maerov and Bob Weinstein. The suit, which hasn’t been filed yet but should land imminently, charges that Glasser has been made a convenient scapegoat.
If you are one of the beleaguered staffers who’ve hung in since last fall, hoping you would continue to have a place to work, all this saber rattling could be considered Nero fiddling while Rome burns.
A plunge into bankruptcy was expected to be exercised by most of the 20 other bidders, who were looking to strip off library and active titles, but not step up to the vast debt load. A bankruptcy might drop the price, and erase the stigma of Harvey Weinstein. It would likely create a cents-on-the-dollar proposition for all the contractual obligations, debts, employment contracts and class action suits where victims would potentially have to get in line along with other creditors. The Contreras-Sweet/Burkle/Lantern bid would have provided a more orderly transition, reviving and releasing the projects, exploiting the library and keeping the staff employed.
If this actually does implode, it will be a collective effort of snatching defeat from the jaws of victory, if you are an employee of the company, or a potential victim of Harvey Weinstein seeking to collect for collective shame, pain and suffering that has been voluminously and graphically described in those New York Times and New Yorker articles. For his part, Harvey Weinstein has steadfastly denied any non-consensual sexual activity.
This is a chess game, playing out in real time, with high stakes: 150 or so staffers who could face layoffs.