Weinstein Co. files for bankruptcy
The Weinstein Co. clung to life longer than anyone in Hollywood expected following a sexual harassment scandal so big that it started a global workplace reckoning.
But the troubled studio finally flatlined.
The Weinstein Co. filed for bankruptcy protection late Monday in U.S. Bankruptcy Court in Delaware. The company had been struggling after one of its co-founders, Harvey Weinstein, was fired as chief executive in October after women publicly accused him of sexual misconduct stretching back decades.
The studio said that it had lined up Lantern Capital Partners, a Texas private-equity firm, as a “stalking horse bidder,” meaning that it will be the first bidder in the bankruptcy process, which allows a distressed company to avoid low bids on its assets.
Lantern Capital will have to compete with other potential buyers in a court-supervised auction. Andy Mitchell and Milos Brajovic of Lantern Capital said in a statement that they hoped to acquire Weinstein Co.’s assets “as a going concern.”
As part of the Chapter 11 filing, the company said it released anyone “who suffered or witnessed any form of sexual misconduct by Harvey Weinstein” from nondisclosure agreements. The move had been advocated by New York Attorney General Eric Schneiderman, who is investigating wrongdoing at the studio. Weinstein was able to cover up allegations of misconduct for so long in part by relying on the unusually restrictive agreements.
“No one should be afraid to speak out or coerced to stay quiet,” the company said, going on to thank “the courageous individuals who have already come forward.”
“Your voices have inspired a movement for change across the country and around the world,” the company added. “The company regrets that it cannot undo the damage Harvey Weinstein caused but hopes that today’s events will mark a new beginning.”
Schneiderman said in a statement that the company’s decision to release any victims and witnesses from nondisclosure agreements is “a watershed moment for efforts to address the corrosive effects of sexual misconduct in the workplace.” He added that he welcomes “the parties’ efforts to preserve jobs and pursue justice for victims.”
Spokeswomen for Weinstein have denied that he ever engaged in “nonconsensual sex.” He has spent recent months seeking treatment for sex addiction and anger management, according to his representatives.
Weinstein, who is now a Hollywood pariah, has an array of legal problems that are separate from the bankruptcy case. Prosecutors in New York, Los Angeles and London are pursuing possible criminal cases against him. A lawsuit filed last month by Schneiderman will continue. Weinstein also faces additional civil suits, including one filed by British actress Kadian Noble, who is suing him for sex trafficking.
But the bankruptcy filing does halt lawsuits against the company, including those filed by women who contend that the studio facilitated misconduct by Weinstein. Those women will now have to line up behind the studio’s secured creditors — who themselves are likely to be paid pennies on the dollar, according to bankruptcy lawyers.
The upshot is that women alleging abuse may now have a harder time recovering damages.
The filing, which was expected, ends a chaotic five-month effort to keep Weinstein Co. afloat.
In the fall, after the New York Times and the New Yorker revealed allegations of sexual harassment and rape, Weinstein’s younger brother and partner in the studio, Bob Weinstein, unsuccessfully scrambled to line up bridge loans to keep the company operating. He sold “Paddington 2” rights to Warner Bros., which bought time but resulted in a lawsuit.
By early February, it seemed as if Weinstein Co. had found a way forward. A group of investors, including billionaire Ron Burkle and Lantern Capital, had made an offer to buy most of the studio’s assets, which include the TV series “Project Runway” and the rights to more than 275 films.
The investor group, managed by Maria Contreras-Sweet, who ran the Small Business Administration under President Barack Obama, had offered to pay off what it believed was the Weinstein Co.’s debt — about $225 million.
In return, it would receive most of the studio’s assets, which Contreras-Sweet planned to use to start a new, femaleled film company.
But then Schneiderman threw the brakes on a sale, filing a lawsuit alleging that the studio and the Weinstein brothers had violated various state and city laws. He also said the proposed sale to Contreras-Sweet’s group was unacceptable because it did not adequately compensate victims, protect employees and ensure that those who enabled or perpetuated Weinstein’s conduct would not be rewarded.
The Weinstein Co. and the investor group moved to address those concerns, but the studio’s board announced Feb. 25 that it would file for bankruptcy because Contreras-Sweet had not delivered on a promise to fund the studio’s operations until a transaction was completed.
Schneiderman was able to get the deal back on track this month, when he hosted a meeting between the two sides at his offices. He did so after the buyers and sellers had committed to various terms, including establishing a victims’ fund worth as much as $90 million. The Weinstein brothers, who jointly own about 42 percent of the studio, would receive no cash from the sale.
But the sale collapsed a few days later after the investor group discovered that the studio had an additional $55 million to $65 million in debt.