2ND UPDATE with bankruptcy details: Sources said TWC will move quickly into 363 bankruptcy, likely by March 15. It is expected to follow the orderly bankruptcy procedure that MGM went through several years ago, because there is no shortage of bidders that want these assets. Those bidders will begin meeting tomorrow in Los Angeles. There are about six or so that are considered favorites. They include Lantern Capital (which has an advantage because it was part of the other bid),Miramax (beIN), Lionsgate, Vine Investments and Critical Content. Staff was paid, but what happens after bankruptcy is anybody’s guess.
UPDATE with additional details, Allred and New York AG statements: Still trying to find out exactly why The Weinstein Company deal cratered so abruptly, but sources are saying that the buyers group headed by Maria Contreras-Sweet, Ron Burkle and Lantern Capital discovered some undisclosed liabilities at TWC for the first time today. That included we hear $27 million in residuals and profit participation, $20 million in accounts payable, and $17 million in a commercial arbitration award.
Word also is that payroll was due today, and that money was supposed to be floated by the new buyer, in the deal worked out last week. The money wasn’t paid. That payroll and operating fund commitment was about $1.8 million.
So now Moelis & Co. will likely put TWC into 363 bankruptcy as soon as tomorrow. Are people going to get paid at TWC? Will a DIP (Debtor In Possession) float payroll and other operation costs so paychecks clear? How quickly will stalking horse bid emerge when the company hits bankruptcy? Lotta questions and I’m trying to verify this and other information.
A New York Attorney General’s office spokesperson said later this afternoon that its civil rights lawsuit against The Weinstein Company, Bob Weinstein, and Harvey Weinstein “remains active and our investigation is ongoing.” They added: “We’ll be disappointed if the parties cannot work out their differences and close the deal.”
Said Gloria Allred, who reps several alleged victims of Harvey Weinstein sexual misconduct, of the news today: “This has been a roller coaster for the many victims whom I represent. One day their hopes for justice are raised and shortly thereafter, their hopes are dashed. We do not know what the future may hold, but we remain hopeful that whether through sale or bankruptcy, the victims of Mr. Weinstein will be compensated.”
PREVIOUS, 1:17 PM: In what sounds like the final coffin nail in the ongoing saga of The Weinstein Company and the sale of its assets to the buying group headed by Maria Contreras-Sweet, Ron Burkle and Lantern Capital, Contreras-Sweet has just issued a statement that the deal is once again off. This is her second such statement, the first of which seemed a warning shot that presaged a last-minute bargaining session with the remaining board of directors Tarak Ben Ammar, Lance Maerov and Bob Weinstein, and New York Attorney General Eric Schneiderman, whose civil rights lawsuit just prior to the deal’s close scrapped a nearly closed deal several weeks ago.
Early word was the buyer wanted certain documents and didn’t get them, and they were not turned over. The deal fell apart last time because the buyer would not float funds until a transaction was certain, because of the risk that Contreras-Sweet/Burkle/Lantern would have to line up like everybody else as creditors in a bankruptcy. Deadline laid out those bidders last year. More than 20 came in, including bids for just the TV component, or the library — and the ones in the final round included Lionsgate, a Killer Content bid backed by Abigail Disney (daughter of Roy Disney), Shamrock Capital (for the library), Vine Investments (for the library), Sony (for the television business), MSD Partners, Critical Content, Versa, and Qatar-based beIN which owns Miramax.
Here is Contreras-Sweet’s statement:
“All of us have worked in earnest on the transaction to purchase the assets of The Weinstein Company. However, after signing and entering into the confirmatory diligence phase, we have received disappointing information about the viability of completing this transaction.
As a result, we have decided to terminate this transaction.
I would like to thank the employees and the board of The Weinstein Company for pursuing this opportunity with us and Attorney General Eric Schneiderman for playing a crucial role at a critical time. I especially want to thank Ron Burkle and The Yucaipa Companies for their advice, showing faith in this deal, and taking an unusual step of subordinating many typical investor board rights to the women who would have led this company. I would like to thank Lantern Asset Management for their early capital commitment and Len Blavatnik for his willingness to look at creative options on the debt side. Lastly, I would like to thank Tarak Ben Ammar.
I believe that our vision to create a women-led film studio is still the correct course of action. To that end, we will consider acquiring assets that may become available in the event of bankruptcy proceedings, as well as other opportunities that may become available in the entertainment industry.
I remain committed to working to advance women’s business ownership in all sectors and to inspire girls to envision their futures as leaders of important companies.”
This is a stunning development. What does it mean? Likely that TWC’s assets follow that path to a 363 bankruptcy, which would wash the assets of obligations and allow about 20 other suitors to pick the company’s carcass apart. They will have access to the library of film and TV shows, completed films and development projects. There were bids that ranged from Lionsgate to beIN Media to Sony. Unclear is how that will impact the $90 million victims fund that was negotiated with the New York AG and included a $60 million insurance policy plus about $30 million-$40 million that was to be supplied by the suitor. Also unclear is the futures of about 150 employees who looked to be safe when the deal was resurrected after last Thursday’s marathon session overseen by the AG.
The Relativity bankruptcy racked up over $50 million in lawyer, banker and other fees. It’s possible that nearly that much money could be consumed here. Each of the new stalking horse bidders will be able to make their own pledges toward a victims’ fund, but the derby to win the assets of the company destroyed by Harvey Weinstein’s scandal is wide open again. Already hearing speculation that Lantern Capital could be right back in this. After all, they know everything, while the other bidders were locked out of the due diligence process for a long time as this exclusive negotiation has dragged on.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.