While a major element of the Weinstein Co. bankruptcy proceeding — a petition to change it from Chapter 11 to Chapter 7 — was postponed again Monday, two major claims have been settled.
U.S. Bankruptcy Court Judge Mary Walrath approved the settlements, one involving Viacom and the other between Weinstein Co. lender AI International and Union Bank. The latter pivoted on a $46 million claim from AI, which is tied to former Weinstein Co. backer Len Blavatnik, over proceeds from the sale of the Weinstein Co. to Lantern Entertainment for $289 million last year. The settlement saw the withdrawal of the claim.
The Viacom matter, which an attorney for the Weinstein Co. noted Monday had started out in the range of $40 million, was reduced to $16 million and then to a final amount of $11 million. Viacom will pay that final amount to Spyglass Media (which earlier this year teamed with Lantern on a new parent for the Weinstein assets) to resolve a dispute over Scream. The TV series adaptation of the hit horror series initially launched by Bob Weinstein’s Dimension Films in the 1990s just debuted its third season on Viacom’s VH1. Its first two seasons had streamed on Netflix after originally airing on MTV.
Viacom initially had objected to a settlement between the Weinstein Co., Lantern and Netflix, mainly because it felt it had been cut out of the process. The media company said that settlement left the company unduly responsible for $9 million in financing for Scream. The production funding for the show’s third season, it said, had been advanced on an emergency basis. Shooting was planned as the Weinstein Co.’s business began to crumble in the fall of 2017 amid waves of sexual misconduct allegations against Harvey Weinstein.
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During a 20-minute bankruptcy court hearing in Delaware on Monday morning, an attorney for Spyglass said the settlement also covers Sin City 2, which was not part of the asset portfolio acquired by Lantern. Under the terms of the settlement, Spyglass will collect and deliver proceeds from Sin City 2 on a quarterly basis to the debtors’ estate. Viacom also agreed to waive any further claims against the Weinstein Co. estate.
Paul Heath, an attorney with Richards Layton & Finger who represents the debtors, told Walrath at the start of the hearing that progress in settlement talks warranted another delay in the central matter of converting the bankruptcy proceeding from Chapter 11 to Chapter 7. “It’s fair to say that the negotiations have been arm’s-length and difficult at times,” Heath said during the hearing, which was made available via teleconference. “While it’s not at the finish line, there’s been sufficient progress to warrant a further extension. I think that the parties are optimistic that they’re going to be able to achieve a deal.”
In a Chapter 7 scenario, the company would be liquidated and a civil settlement of the claims against it would not be able to go forward. Settlement talks under a Chapter 11 framework have been a complex undertaking involving the insurance companies backing the officers and directors of TWC, the New York State Attorney General’s Office and the Committee of Unsecured Creditors. The committee represents many of those who have accused Harvey Weinstein of sexual assault, harassment and retaliation, and former officers and directors of enabling his conduct.
The most recent global settlement offer, totaling a reported $44 million, became public in May and complicated the bankruptcy process. That proposed deal would have compensated the many accusers of Harvey Weinstein, but also board members and other equity holders to a degree some accusers felt was improper. Several accusers, including actress Ashley Judd, publicly rejected the settlement as inadequate.
Heath said the Viacom and AI/Union Bank settlements would help “clear the clutter” in the case, which is has been grinding on for nearly a year and a half.
Bennett Murphy, an attorney with Quinn, Emanuel representing AI International said during the hearing that as recently as May the likelihood of a settlement was “as close to zero as you could get.”
Walrath extended her thanks “to the parties for resolving what promised to be a thorny dispute.”
Jennifer Hagle with Sidley Austin, representing Union Bank, described the process as “a long road.” The release of the liens on cash collateral, she added, would enable the parties to “hopefully move forward on implementing a global settlement. … As happy as we are to free up the cash collateral, we’re even happier to exit the case.”
Harvey Weinstein still faces charges of sexual misconduct, including rape, and will stand trial in a New York court in September.
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