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Approval of Rhythm & Hues Sale Delayed

A decision on whether or not a California bankruptcy court will approve a sale of Rhythm & Hues is delayed Friday after bidders and a creditor object to a potential deal.

A decision on whether or not a California bankruptcy court will approve a sale of Rhythm & Hues was delayed Friday after bidders and a creditor objected to a potential deal, according to a report by The Wrap.

A holding company associated with Prana Studios submitted the winning bid to acquire the bankrupt visual-effects company following a turbulent, two-day bidding process.

However, before it can finalize the deal it will have to deal with objections from two former bidders, Prime Focus and JS Communications. Prime Focus, an Indian visual-effects company, was one of the major suitors in the hunt for Rhythm & Hues, but is objecting to the auction because it claims that it was not permitted to make a final bid for the company.

JS Communications had been selected to be the company's stalking horse bidder, although it withdrew from bidding shortly before the auction took place this week. The company's chief executive officer reportedly said that he walked away from the bidding because Rhythm & Hues' studio creditors were not being cooperative.

Despite walking away, the South Korean media company says it is unjustly being denied its $425,000 break-up fee. In an objection filed Thursday, the company accuses Rhythm & Hues of attempting to shut it out of the bidding process.

Evan Jones, an attorney for JS Communications told Judge Neil W. Bason that the auction was not done in good faith, labeling the sale as a bag of "smelly goods."

Brian Davidoff, an attorney for Rhythm & Hues, told Judge Bason that there was also a "language" issue in the sales agreement related to the company's employees that needs to be resolved.

R&H filed for chapter 11 bankruptcy protection February 13, drawing global attention to the troubled VFX business climate, and serving as a catalyst for the VFX community to mobilize to bring attention to such issues as globalization and subsidies.

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