Weinstein Co. raids film library to settle debts
Weinstein Co. has struck a deal to restructure its debt in the wake of several film flops, but the arrangement leaves the independent production company with a formidable task if it is to turn around its fortunes.
The settlement calls for the New York studio, run by Bob and Harvey Weinstein, to turn over about 200 titles from its film catalog to Goldman Sachs and insurance company Assured Guarantee, which were owed $450 million as part of a $1.2-billion financing package the investment bank arranged for Weinstein Co. when it launched in 2005, two people familiar with the situation said Thursday.
The movies handed over by Weinstein Co. — which include the 2007 remake of " Halloween” and the 2008 Woody Allen comedy “Vicky Christina Barcelona” — are estimated to be worth at least $233 million in future revenue.
Under the settlement, insurance company Ambac, which insured $500 million of Weinstein Co.'s debt, will pay $115 million to Goldman Sachs and Assured.
The deal wipes out the studio’s debt and gives it the opportunity to continue producing and releasing movies.
“I’m very excited about this deal as it’s beneficial to all parties involved,” Harvey Weinstein said in a statement. The settlement was first reported by the Wall Street Journal.
Rebuilding the business will not be easy for the Weinstein brothers, who founded Miramax Films in 1979, sold it to Walt Disney Co. in 1993 and were forced out in 2005. The studio will continue to make some money from a remaining library of about 150 titles, including last year’s hit “Inglourious Basterds” and the musical flop “Nine,” both films to which Weinstein Co. owns partial rights. It also has a small television division that produces the reality show “Project Runway.”
But Weinstein Co.'s future rests largely on the brothers’ ability to make more hit movies. Their long list of flops over the last few years include the Michael Cera comedy “Youth in Revolt,” the comedy “The Matador” starring Pierce Brosnan and " Soul Men,” headlined by the late comedian Bernie Mac. They also have several films that have long been awaiting release, including the animated “Hoodwinked Too! Hood vs. Evil,” as well as others that bypassed theaters and were released only on DVD, such as the Forrest Whitaker drama “Hurricane Season.”
Weinstein Co. senior executive David Glasser said the Weinstein brothers had been distracted in the past by failed forays into Internet and fashion companies, but have since become completely focused on films.
“It’s about getting back to what Harvey and Bob do best, which is market and make movies,” he said.
The studio has a credit facility of about $50 million from Goldman based on expected future revenue from its remaining library of films. It will tap that line for production and marketing expenses. After January’s “Youth in Revolt,” its next scheduled release is horror movie “Piranha 3-D” in August.
Weinstein Co. is also planning to start production this summer on fourth installments in the “Scream” and “Spy Kids” franchises.
Over the last five years Weinstein Co. has laid off dozens of employees and scaled back operations as it suffered from box office bombs and lower-than-expected returns from its library. The studio acquired hundreds of completed movies for its library and then, like many in Hollywood, saw their value plummet as DVD sales dropped in recent years.
According to a recent court deposition by an Ambac executive, Weinstein Co. “has lost money in every year for which audited financial statements are available and has had negative cash flows from operations in each year since inception.” The company began violating provisions of its debt facility in 2006 and has entered into 25 amendments and waiver agreements to the facility since then, the executive said.