Dominic Patten contributed to this report
4TH UPDATE, THURSDAY 11:00 AM The court has given Legendary the go-ahead to infuse Rhythm & Hues with another $4.9M to finish Seventh Son. Law firm Venable LLP repped the studio, which sought the court’s approval to pump additional payments into the ailing effects house after receiving only 25% of their commissioned 225 VFX shots last December.
3RD UPDATE, WEDNESDAY AM: Legendary Pictures has officially filed a motion to be allowed to give Rhythm & Hues an additional $4,961,751 to complete VFX work on their October release Seventh Son, according to a change order filed yesterday (read it here).
2ND UPDATE, FRIDAY PM: In a preliminary ruling, Judge Neil Bason has approved $11 million of the loan. A first disbursement of $6 million is expected immediately, with $5 million to follow on February 19. On March 12, Bason will offer final judgement on the loan and, pending no legal hurdles or objections, allow the remaining $5.5 million to be given to Rhythm & Hues.
UPDATE, 12:40 PM: Legendary Pictures has asked the court if it can write a check to Rhythm & Hues outside the DIP loan being offered by Universal and Fox. The production company said if the “change order” is not approved it could mean a $9 million hit, and that even though it’s already paid for the work it’s willing to “pay twice” to get its movie finished. That could be a reference to Guillermo del Toro’s Pacific Rim, which already has set a July 12 release date via Warner Bros. (UPDATE: Nope. Legendary lawyers say it’s the Jeff Bridges-starrer Seventh Son, which has an October 18 release date via Warner Bros. A hearing date has been set for February 21.)
Additionally today, two former employees of the VFX company filed similar class action suits against Rhythm & Hues over letting people go without proper notification. Former compositing technical director Anthony Barcelo says in his complaint (read it here) that under the Worker Adjustment and Retraining Act, he and others should have given 60 days’ written notice for being terminated without cause. The other suit (read it here) is from Thomas Capizzi, who also alleges he and others were fired from the company without the required written notice or cause. On Monday, Rhythm & Hues let go 254 of the company’s approximate 700 employees at its El Segundo offices.
PREVIOUS, 9:37 AM: The Oscar-nominated Life Of Pi VFX house is desperately seeking approval of a $17 million emergency loan from Universal and 20th Century Fox at a preliminary hearing in LA this morning in federal bankruptcy court. The studios are two of Rhythm & Hues’ biggest clients; another, Warner Bros, has withdrawn its projects and financial support. The troubled effects company filed for Chapter 11 bankruptcy protection Wednesday. If approved, the loan (read the motion here) will allow the company to complete contracted work on the studios’ projects and continue operations through the end of April. The financially unstable company could also seek new work and possible buyers during this period.
Rhythm & Hues claimed it had $33.8 million in liabilities by the end of 2012 according to a filing submitted this week. If the DIP loan is not approved, the company will be unable to operate and must liquidate immediately, according to the documents. The Rhythm & Hues filing also reveals that Universal and Fox had already floated the company two loans in the amount of $750,000 and $5.25 million to clear its payroll through January 15, the last date many employees reportedly received payment for completed work. At least 200 employees were laid off last week without any promise of a paycheck, multiple sources tell Deadline. CEO and founder John Hughes will appear this morning in front of Judge Neil Bason.
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