Lantern Entertainment has agreed to create a fund for The Weinstein Co.’s unsecured creditors, a group that includes co-founder Harvey Weinstein’s accusers as well as the actors, directors and others in Hollywood who say they’re still owed money for their participation in the bankrupt studio’s films and television shows.
The Dallas-based private equity firm pledged to contribute $8.75 million to an escrow fund to pay participation and other claims, according to documents filed late today in U.S. Bankruptcy Court in Delaware. That sum is in addition to the $289 million purchase price for The Weinstein Co.’s assets.
It is unclear how far this amount will go toward making Weinstein’s alleged victims, and Hollywood actors, directors and producers, whole. The debtors will determine how these funds will be allocated, sources say.
Some of Hollywood’s most prominent actors, directors, producers and writers today raised objections to the sale of The Weinstein Company to Lantern Capital, raising concerns about the private equity firm’s willingness to make good on the bankrupt company’s contractual obligations.
The list of those who say they’re still waiting for their checks includes a who’s who of Hollywood elites including Brad Pitt, David O. Russell, George Clooney, Jake Gyllenhaal, John Cusack, Julia Roberts, Meryl Streep, Rachel McAdams and Robert Di Niro, as well as CAA. Quentin Tarantino said he’s owed $4.3 million in unpaid royalties and participations in connection with four of his films distributed by The Weinstein Co.
Court papers spell out, in vivid detail, how disagreements over who would pay these outstanding claims nearly derailed the deal.
Robert Del Genio, the chief restructuring officer of The Weinstein Co., said in a deposition that the disagreements over these payments — known in bankruptcy parlance as “cure amounts” — arose after the bankruptcy court designated Lantern the successful bidder for the company’s film and television assets.
The Weinstein Co. maintained that the purchase agreement required Lantern to pay the participation fees and other debts associated with the projects it would acquire. Lantern said it had no intentions of paying the bankrupt studio’s old bills.
In early June, the two exchanged threats of legal action.
“During the intervening weekend, however, Lantern reaffirmed its commitment to closing the sale and re-engaging with the Debtors to resolve the issues surrounding payment of cure amounts under the asset purchase agreement,” Del Genio wrote.
The Weinstein Co. and Lantern reached another impasse in mid-June, with Lantern “questioning whether closing the sale made economic sense for Lantern absent an adjustment to price,” according to Del Genio’s account.
Lantern Capital CEO Andy Mitchell initially demanded a $46 million price cut, citing the sheer number of outstanding claims and disputes with key business partners that The Weinstein Co. failed to disclose before the two sides reached a deal.
Over continued negotiations, that continued through July 5, Lantern, The Weinstein Co. and the creditor’s committee agreed to a $21 million price reduction.
In exchange for the discount, Lantern’s agreed to pay “no less than” $8.75 million in claims, to set aside any legal action stemming from The Weinstein Co.’s sale of Paddington 2 and The War With Grandpa, and to decide within 120 days which contracts it would assume or reject.
Del Genio said the revised purchase agreement, filed today, provides greater certainty that the sale will close by July 17.
“Failure to close by the financing deadlines would likely mean that the transaction could never close and the debtors would be forced into a value-destructive liquidation,” Del Genio said.