A Delaware bankruptcy judge on Tuesday issued initial orders allowing the Weinstein Co. to continue paying its bills and working toward a sale of substantially all of its assets.
Judge Mary Walrath's rulings include interim approval for the company to borrow up to $25 million to see it through bankruptcy, but only after she expressed concern about the loan terms in the face of a competing financing proposal.
After lengthy arguments by attorneys, Union Bank, the Weinstein Co.'s major existing lender and primary secured creditor, agreed to reduce the amount of upfront fees it was seeking to provide bankruptcy financing.
Robert Del Genio, a consultant serving as chief restructuring officer for the Weinstein Co., testified that the time constraints the company is facing and the loan certainty offered by Union Bank were key factors in accepting its financing offer, which includes an initial draw of $7.5 million.
"This company has been liquidity-constrained for quite some time," said Del Genio. "... As of last night, we had $218,000 of cash."
Lantern Capital Partners, a Dallas-based private equity firm, has offered $310 million in cash for the Weinstein Co.'s assets. It also has agreed to assume about $125 million in project-related debt and to cover obligations related to the assumption of certain contracts and leases.
The company's primary assets are a lucrative 277-film library, a television production business, and an unreleased film portfolio that includes four distribution-ready films and other projects in various stages of development.
As the lead, or "stalking horse" bidder, Lantern is entitled to a breakup fee of $9.3 million and expense reimbursement of up to $6.2 million if the Weinstein Co. accepts another bid, which would have to be at least $1 million more than the combined amount of Lantern's offer and bid protections.
Walrath scheduled an April 6 hearing on the proposed bid procedures, which propose a May 2 auction if there is more than one qualified bidder. Meanwhile, a March 28 meeting is scheduled regarding the appointment of an official committee of unsecured creditors.
Weinstein Company Holdings and 54 related entities sought bankruptcy protection Monday amid a sexual misconduct scandal that brought down co-founder Harvey Weinstein and triggered a nationwide movement to address predatory sexual behavior and harassment in the workplace.
Paul Zumbro, an attorney for the company, said the bankruptcy case is not about trying to protect Harvey Weinstein, but trying to do what is best for creditors and employees and to keep the company operating. It has 85 full-time staffers and 12 independent contractors.
"We are not here to talk today about Harvey Weinstein," said Zumbro, who gave Walrath a brief chronology of the events leading up to the bankruptcy filing. Media reports in October of "pervasive sexual misconduct" by Harvey Weinstein over more than 20 years had an "immediate and profound" effect on the company, he noted.
"The backlash against the company from all sides was immediate, it was intense and it was extraordinarily public, triggering a rapid downward spiral," Zumbro said.
The bankruptcy case does not affect anyone's ability to pursue civil or criminal claims against Harvey Weinstein in his individual capacity, Zumbro assured the judge. The company announced Monday that it was releasing any victims of or witnesses to Weinstein's alleged misconduct from nondisclosure agreements preventing them from speaking out. That move had long been sought by New York Attorney General Eric Schneiderman, who has filed a lawsuit against Weinstein and the company on behalf of its employees.
"We are trying to make the best out of a terrible situation," Zumbro said.
The movie and TV studio is the first high-profile company to be forced into bankruptcy amid the nationwide outcry over workplace sexual misconduct. Dozens of prominent men in entertainment, media, finance, politics and other fields have seen their careers derailed, and scores of women, including prominent actresses, have accused Harvey Weinstein of misconduct ranging from rape to harassment.
Weinstein, who was fired as his company's CEO in October, has denied any allegations of nonconsensual sex.