Weinstein Co. files for bankruptcy with plan to sell film assets
Delaware/New York/Los Angeles: Weinstein Co., the troubled movie company that failed in the wake of sexual harassment claims against co-founder Harvey Weinstein, filed for bankruptcy with plans to sell its entertainment assets.
Under a deal the company announced in a statement Monday, Weinstein will sell itself to an affiliate of Dallas-based Lantern Capital Partners.
The film studio, founded in 2005 by Weinstein and his brother Bob, sought protection in Wilmington, Delaware, listing as much as $1 billion in debt and $1 billion in assets. Weinstein was fired from the company, and has denied non-consensual sex.
The company also agreed to release any women who settled sexual harassment claims involving the company from their non-disclosure agreements, freeing them to tell their stories without fear of being sued.
“No one should be afraid to speak out or coerced to stay quiet,” the company said in a statement.
The proposed sale must be approved by a bankruptcy judge. Under the proposed reorganization, Lantern would act as a so-called stalking horse, which means other bidders would have a chance to top that initial offer.
The filing comes after at least one other buyer backed out after discovering how high the company’s liabilities could go.
Maria Contreras-Sweet, a former head of the small-business administration under President Barack Obama, had formed a group to buy the company, emphasizing that she wanted to advance women’s business ownership through a deal. But she announced 6 March that the group was pulling out after discovering the company’s liabilities are higher than the $225 million previously thought.
It was her second offer, after a November bid had also been made. Her group, which included billionaires Ron Burkle and Len Blavatnik, has indicated it would consider the assets again if they became available in a bankruptcy.
The scandal, which has grown to include more than 80 allegations of individual abuse, has become more of a media topic than the firm’s highest grossing films like Django Unchained and The King’s Speech.
Despite Weinstein’s departure, troubles have snowballed, with partners and lenders distancing themselves and a February lawsuit from New York state alleging a pervasive culture of abuse. The complaint said “wing women” and sex scheduling by assistants were examples of how the company aided and abetted Weinstein’s harassment while its board and executives looked on.
Bankruptcies are often used to cleave profitable assets from legacy liability, with the economic rationale of giving a promising business a new start. They usually do so through a trust, which caps the amount that can flow out for issues like faulty products or toxic pollution exposure.
The lawsuit from New York Attorney General Eric Schneiderman implied that the initial $500 million bid from Contreras-Sweet might leave victims without enough funding for such a trust.
Weinstein is one of many powerful men around the country being ousted amid a movement signified by #metoo and #timesup on social media. The Los Angeles district attorney even created a special task force to deal with a deluge of sexual abuse claims in the entertainment industry. The bankruptcy shows how difficult it can be for companies to sever themselves from key figures—an issue even trickier for entertainment companies, where “talent” is seen as a highly specialized asset.
Since Weinstein’s departure, Tom Barrack’s Colony Capital has dropped plans to make a cash infusion, and Fortress Investment Group LLC’s negotiations to provide a $35 million lifeline were said to end.
One lender, AI International Holdings, affiliated with Len Blavatnik’s Access Industries, said in a lawsuit that Weinstein’s departure from the company and the circumstances surrounding it were an event of default under a $45 million loan. It entered into a forbearance agreement.
Apple Inc., Viacom Inc. and A+E Television Networks LLC had previously pulled projects with Weinstein Co.
The New York lawsuit said a four-month investigation showed how Weinstein forced female employees to serve in “humiliating and demeaning roles that required them to facilitate and support” his sexual activity, including by accompanying him to parties as “wing women,” where they introduced him to young women, and keeping space open on his calendar for sexual activity.
Actresses that have accused the company include Dominique Huett, who claimed Weinstein masturbated in front of her and performed oral sex on her in 2010, suing for $5 million; and Uma Thurman, who starred in some of Weinstein’s hit movies, such as Pulp Fiction and the Kill Bill trilogy.
The case is In re: The Weinstein Company Holdings LLC, 18-10601, U.S. Bankruptcy Court, District of Delaware (Wilmington) Bloomberg