A lender to Harvey Weinstein's movie studio, Weinstein Co., is demanding immediate payment of a $45 million loan, saying that Weinstein's termination from the company and the events surrounding it constitute a violation of the debt agreement.
The lawsuit brought before the Supreme Court of New York State is yet another tailwind hastening the once-celebrated studio toward bankruptcy.
AI International Holdings (BVI) Ltd., represented by Quinn Emanuel Urquhart & Sullivan LLP, filed its lawsuit Nov. 10 saying that it demanded payment in full of the $43.5 million balance on the loan it made in 2016. AI said it issued the company a notice of default on Oct. 10 following Weinstein's termination, declaring the principal and $481,000 in unpaid interest on the loan immediately due. The interest rate, previously set at 14%, stepped up to 15% on Nov. 13.
Following that, according to court documents, the company missed its Oct. 14 interest payment to AI. The following week the lender filed a control order with the bank were a special deposit account was to be held, per the loan agreement, only to find that the account was empty.
On its own, such actions by a lender could prompt a bankruptcy filing by a company seeking to protect its assets from a foreclosure. However, the company is also facing the possibility of exposure to massive liabilities related to the allegations of sexual harassment and assault against Weinstein. Lawsuits have been brought and the New York Attorney General is investigating. Additionally, the company has experienced the exodus of employees and board members in the wake of the allegations.
As such, Weinstein Co. has been seeking to execute a sale transaction or line up emergency financing, according to press reports, that likely would only be provided alongside the protection afforded to lenders in Chapter 11. Following a collapsed deal with Colony Capital, Weinstein was near to deal on a $35 million loan from Fortress Investment Group, Deadline reported Nov. 8.
However, Debtwire reported the same day that negotiations with Fortress had also fallen apart that the company may need to file for bankruptcy without a deal. The news service also said that law firm O'Melveny & Myers has been retained to represent Weinstein Co., while Sidley Austin LLP had been retained to guide the company's bank lenders through a filing.
No lawyers for Weinstein Co., Fortress, O'Melveny or Sidley Austin responded to request for comment.
The Weinstein Co. was established in 2005 by Harvey Weinstein and his brother, Bob, after the pair left Miramax Films, which they also co-founded. The film studio has produced high-grossing and critically-acclaimed movies including Django Unchained, The King's Speech, Silver Linings Playbook and Inglorious Basterds. Its movies currently in theaters include Three Generations, Lion and Gold.
On Oct. 5, the New York Times published a report stating that Weinstein had for decades sexually harassed and assaulted women that worked for him, and then paid off the ones that came forward afterward. The article detailed the accounts of eight women, including actress Ashley Judd.
Following the article's publication, and as the stories of more women surfaced, Weinstein Co. fired its naming founder. But the action doesn't protect the company from liability, as many allege that it was complicit in covering up his behavior.
Weinstein has said that the allegations are false.