The Weinstein Company Bankruptcy Threat Looms: Allegations Against Harvey Weinstein Push Studio into Financial Crisis

Bankruptcy Ahead for The Weinstein Company?
Dimitrios Kambouris/Getty Images for TNT

Bankruptcy looms for The Weinstein Company Inc. unless the embattled film company can secure a financial lifeline. Over the last six weeks, The Weinstein Company has lost business partners, board members, and creative talent in the wake of a litany of sexual harassment and abuse allegations leveled against co-founder Harvey Weinstein.

Weinstein has been accused of sexual assault and/or harassment by more than 75 women, including actresses Rose McGowan, Angelina Jolie, Mira Sorvino, Gwyneth Paltrow, Annabella Sciorra, and Paz de la Huerta.

While the influential movie studio has long denied it is in dire financial straits, the fact is, The Weinstein Company has a crippling debt load of around $520.0 million. If the studio can’t find someone to lend it enough money to keep afloat, it will most certainly need some form of bankruptcy to help it reorganize.

The Weinstein Company’s Bank Lenders Initiate Restructuring Process

The fallout from the allegations of sexual harassment and assault against Harvey Weinstein has pushed the onetime darling of Hollywood to the brink. In an effort to avoid Chapter 7 or Chapter 11 bankruptcy, the film and television studio is looking to secure a financial lifeline in order to restructure its assets.

The Weinstein Company has apparently engaged FTI Consulting, Inc., a business advisory firm, for advice on restructuring or a possible sale. Should The Weinstein Company not be able to find a business partner, the studio believes that, at the very least, it can sell off its library of movies and programming.

The list of award-winning films The Weinstein Company has released is huge, and includes The Reader, Inglorious Basterds, The King’s Speech, The Artist, Silver Linings Playbook, Django Unchained, and The Hateful Eight. The studio is also behind TV hits like Project Runway and Mob Wives.

With few businesses willing to do business with a brand as toxic as The Weinstein Company, it appears that in hiring FTI Consulting, a bankruptcy of some sort is becoming more and more likely.

FTI is an international business advisory firm that has lots of experience with corporate finance and restructuring.  Before FTI was hired, it appeared as though The Weinstein Company was heading toward Chapter 7 liquidation. But with FTI in the wings, a Chapter 11 reorganization is coming into focus, as well as opening up the possible sale of its film library.

The sale of its film and programming rights would result in a massive payoff. In 2016, Univision Holdings, Inc. won the bankruptcy auction for Gawker Media, LLC for $135.0 million. Gawker Media filed for bankruptcy after it lost a court case with former professional wrestler Hulk Hogan. The jury awarded Hogan (real name Terry Bollea) $140.0 million.

Should The Weinstein Company sell its assets, it will be able to repay lenders and build a war chest that will help pay civil claims over the actions of Harvey Weinstein.

Financial Woes Started Before Allegations

Even before the avalanche of accusations decimated Harvey Weinstein, his eponymous film studio was drowning in hundreds of millions in debt and facing a financial crisis.

Harvey and his brother Bob formed The Weinstein Company in 2005 following an acrimonious split between his previous production company, Miramax, and Walt Disney Co (NYSE:DIS).

But the new studio has not been as successful at picking the same kind of winners it did at Miramax, LLC, the studio responsible for Pulp Fiction, Shakespeare in Love, and Good Will Hunting. Yes, The Kings Speech, The Reader, and The Artist were all well received, but they weren’t nearly as commercially successful.

On top of that, The Weinstein Company has been taking home fewer and fewer Academy Awards. It took home eight Oscars in 2012, three in 2013, one in 2014, two in 2015, one in 2016, and now none in 2017.

Since being founded in 2005, The Weinstein Company has released 132 movies and has continued to struggle at the box office. Of all of studio’s releases, just 43% have made at least $10.0 million domestically. Only five (three percent) have topped $100.0 million at the North American box office.

Its most recent release, The Awakening (another chapter in the Amityville Horror franchise), grossed just $742.00. Yes, you read that correctly, though it can largely be attributed to it being a single-day theatrical release for a film put on “Google Play” for free. That said, the budget for the movie was probably much higher than $742.00.

It is estimated that The Weinstein Company has a debt load of around $520.0 million. To secure loans for its movies, the studio uses its film library as collateral. The company has two credit facilities, one for $200.0 million secured by its library of films and another secured by its television programming for $20.0 million.

There is also a number of loans for various films and TV shows in production that amount to $150.0 million. The company also has about $50.0 million in corporate debt and $100.0 million that it owes to talent in the form of profit and residuals from films and TV shows it has made over the years.

Harvey Weinstein may have been fired from The Weinstein Company, and perhaps a firm will step up and provide the studio with a financial lifeline and prevent it from filing for Chapter 11 bankruptcy. However, the film studio, much like Harvey Weinstein himself, will not be out of the water.

This saga is just getting started.

 

Sources

Colony Capital has pulled out of talks to acquire Weinstein Co., sources say,” The Los Angeles Times, November 7, 2017.

Univision Wins Bankruptcy Auction for Gawker Media for $135 Million,” The Wall Street Journal, August 16, 2016.

The Weinstein Company struggled financially even before Harvey Weinstein’s sexual misconduct allegations,” MarketWatch, October 13, 2017.

The Weinstein Company Was In Trouble Prior To Sex Abuse Revelations,” Forbes, October 25, 2017.

The Weinstein Company’s Latest Film Made $742 At The Box Office,” ScreenCrush, October 29, 2017.

Weinstein Co. Debt Tops $500 Million,” Variety, November 8, 2017.

Categories: Bankruptcies, NewsArticle

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