Weinstein Company Sale Implosion: NY Attorney General Weighs In

Weinstein Company Sale Implosion: NY Attorney General Weighs In

We’re finally getting some reaction, if not explanation, about the abrupt announcement last night that the board of directors of The Weinstein Company is moving the beleaguered company towards a bankruptcy filing because the cash flow derived from the sale of Paddington 2 rights to Warner Bros has run out. The board acted because it said lead bidders Maria Contreras-Sweet, Ron Burkle and Lantern Capital did not hold true to a pledge to float cash flow. The bidders haven’t yet illuminated their position but it seems clear: why would they part with money after the New York Attorney General Eric Schneiderman stopped a $500 million deal from closing by filing a civil rights lawsuit, and the same thing or something different could happen? If the bid cratered, those bidders might have to line up behind other creditors.

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The Weinstein Co. Says It Will Pursue Bankruptcy As Talks Collapse

The AG’s office just issued this statement, attributed to Director of Communications and Senior Counsel Eric Soufer:

“Over the past two weeks, we had very productive discussions with both parties about accomplishing the Attorney General’s goals of compensating victims, protecting employees, and rooting out those who enabled years of sexual abuse at the Weinstein Company. We are disappointed that despite a clear path forward on those issues—including the buyer’s commitment to dedicate up to $90 million to victim compensation and implement gold-plated HR policies—the parties were unable to resolve their financial differences. We will continue to pursue justice for victims in the event of the company’s bankruptcy, and our investigation into the pattern of egregious abuse by Harvey Weinstein and his enablers is ongoing.”

Deadline reported last week that the deal seemed to be coming back track after the new company agreed to raise its payment into a victims fund from $10 million to about $30 million to 40 million. Paired with insurance policies expected to contribute $60 million, that is how the AG’s office derives the $90 million victims fund which is a win for the AG. The ominous turn toward bankruptcy could throw that into disarray.

Last night marked the second time that the board — led by Tarak Ben Ammar and Lance Maerov, and outgoing co-founder Bob Weinstein — have dropped a late night bombshell in the form of a terse announcement. The first came with a recent Friday night announcement they had fired COO David Glasser for cause, though they have not explained what they meant by cause. Glasser, who has separately been excoriated by Schneiderman as being unfit to lead the new company, in turned announced that he would be filing an $85 million lawsuit against Ammar, Maerov and Bob Weinstein, for being made a scapegoat.

All this heavy saber rattling could be considered Nero fiddling while Rome burns. A a plunge into bankruptcy was part of the plan of most if not all of the 20 other bidders, because the price might drop, the stigma of Harvey Weinstein would be removed, as would the contractual obligations, debts, employment contracts, and class action suits where victims potentially line up along with other creditors. The Contreras-Sweet/Burkle/Lantern Capital bid would have been a more orderly transition, and it is actually does implode, this will be a collective effort of snatching defeat from the jaws of victory at least if you care about the employees of the company, and the potential victims seeking to collect for their collective shame, pain and suffering.

This is a chess game, playing out in real time, with high stakes: 150 or so staffers who could face layoffs.