Digital Domain Scrambles to Avoid Bankruptcy
Digital Domain's latest CEO John Textor stepped down Friday amid SEC filings and a press release announcing a restructuring that includes closing the company's Port St. Lucie, FL, facility and firing most of the 200-plus staffers there. In the wake of those announcements, it remains unclear what direction the company is heading in as it restructures and tries to avoid Chapter 11 bankruptcy.
Digital Domain's founder and former CEO Scott Ross, who sold the company in 2006, said he'd join other investors in a bid for the financially strapped company and take the top job if a turnaround seemed possible, according to a report by Variety.
"If the parameters were right," Ross said. "I have a very close emotional tie to this company and its employees. If there was a path for the possibility of success, I would absolutely consider it."
Ross told Variety he's talked to "financial types, legal types and operational types" about the possibility. He's had no conversations with Palm Beach Capital, Digital Domain's largest shareholder, or Tenor Capital, its biggest lender.
Textor has been a controversial figure in the VFX industry. The former investment banker came to Digital Domain after holding a number executive positions outside entertainment, including CEO of BabyUniverse, which filed for bankruptcy in 2008, and chairman of Sims Snowboards. He also founded investment firm Wyndcrest Holdings. Textor led Digital Domain in new directions such as military simulation and surgical simulation to boost profits outside its core visual effects, a business with notoriously skimpy margins. Digital Domain has rarely been profitable since it went public in 2008.
"The business has always been tough. The visual effects industry is in turmoil. They create the value, they get the butts in the seats, but the studios have ground these guys to a pulp," said Ross, a former general manager for George Lucas' Industrial Light and Magic, who founded Digital Domain in 1993 with James Cameron and Stan Winston.
Textor also drew fire in the VFX community for an unusual partnership with Florida State University where students worked without pay in exchange for college credits at the Digital Domain studio in West Palm Beach.
Textor "brought back a whole lot of new ideas and maybe some of them would have worked out. It just caught up with him," Ross said.
Digital Domain defaulted in late August on $35 million worth of loans and back interest. It reached a temporary truce with lenders led by Tenor to avoid immediate repayment and put in place a special committee to examine its options. The company said solutions could include a debt refinancing with help from an unspecified institutional investor, or selling a substantial equity stake to an unnamed business partner.
In his resignation letter the board, Textor wrote that he was "deeply saddened and heartbroken" by the decision to close Port St. Lucie. "The people of Florida welcomed us with open arms and we certainly owed them greater consideration. We were able to hire and train local residents and have them mentored by the very best of our industry. Our incredibly talented artists and filmmakers were building something truly special."
About 20 employees there will remain in Port St. Lucie for the wind-down, the company said. The studios in California and Vancouver will continue to operate without interruption, as will the Digital Domain Institute in West Palm Beach.
Michael Katzenstein, currently interim chief operating officer, along with the special committee, will assume day-to-day operating responsibility as the company searches for a new CEO.
Meanwhile, Digital Domain's longtime company exec and chief creative officer Ed Ulbrich was promoted to the additional role of CEO of subsidiary of key subsidiary Digital Domain Productions.