Business

Weinstein Company Sale Talks Collapse: No Choice but to Pursue Bankruptcy

Harvey Weinstein
Alexander Koerner/Getty Images

Harvey Weinstein speaks at a press junket during the 12th Zurich Film Festival on Sept. 22, 2016 in Zurich, Switzerland. 

The Weinstein Co. appears headed for bankruptcy four months after larger-than-life film mogul Harvey Weinstein was brought down by multiple allegations of sexual misconduct and assault.

Dropping a Sunday night bombshell, the board of TWC said it has no choice but to pursue bankruptcy in a sharply worded letter rebuking potential buyers Maria Contreras-Sweet and Ron Burkle, who were part of a group of investors looking to redeem the film and production company.

"While we deeply regret that your actions have led to this unfortunate outcome for our employees, our creditors and any victims, we will now pursue the Board’s only viable option to maximize the Company’s remaining value: an orderly bankruptcy process," the letter stated.

Continuing, the letter says, "we must conclude that your plan to buy this company was illusory and would only leave this Company hobbling toward its demise to the detriment of all constituents."

The dramatic turn of events, and finger pointing, comes several day after Contreras-Sweet — a former Obama administration official who is leading a group of investors who would take a 51 percent stake in the company and install a female-majority board — met with New York State Attorney General Eric Schneiderman to address his concerns about a victims fund and the vision for the new company. Burkle, a minority investor, also attended the meeting. 

Earlier this month, Schneiderman effectively blocked the sale when filing a sweeping civil rights lawsuit against TWC, Harvey Weinstein and Bob Weinstein.

One source close to sale talks says the AG's lawsuit delayed matters to the point where TWC was running out of money. "In the end, it was nearly impossible to get a deal done," says another insider.

In Sunday's letter, the board wrote that since the time of the Feb 21 meeting, "we and our advisors have worked tirelessly to finalize an agreement to present to the Attorney General for his approval. While acceding to virtually every demand you imposed, we made clear that the one thing the Company needed in furtherance of your good faith was interim funding to run our business and maintain our employees — employees who have remained dedicated to the Company even amidst great uncertainty. During this time, we waited patiently for you to deliver the terms you represented would save this Company from certain bankruptcy."

The board claims that Contreras-Sweet and Burkle responded with an "incomplete document that unfortunately does not keep your promises of February 21, including with respect to the guiding principles set forth by the Attorney General. Nowhere, for instance, is there any provision for the 'gold standard' human resources policies you promised; instead, you added all new contingencies relating to David Glasser, the former employee of The Weinstein Company who was recently terminated for cause. Likewise, there is no provision for necessary interim funding to ensure your future employees were paid; instead, you increased the liabilities left behind for the Company, charting a financial path that will fail. Other new conditions make clear that a closing, if one were to happen at all, could take many months (or longer). In short, the draft you returned presents no viable option for a sale."

The previous week, the remaining members of the board, including Bob Weinstein, fired COO David Glasser for "cause," but offered no further explanation. On Wednesday, Glasser stated that he is planning to file his own lawsuit against TWC alleging wrongful termination, retaliation, breach of contract and defamation. The lawsuit will name the board members personally and will seek damages in excess of $85 million.

Read the full letter here.