Digital Domain Media Group filed for bankruptcy protection on Tuesday and said its production business would be sold.
According to a report from Reuters , the company, whose founders include Titanic director James Cameron, listed total debts of $214.9 million and total assets of $205.0 million in its Chapter 11 filing.
Digital Domain said it had agreed to sell its production business to private equity fund Searchlight Capital Partners for $15 million. The sale to Searchlight, which manages more than $860 million, is subject to potential other bids through a one-day auction on September 21, as required by the bankruptcy code.
The bankruptcy is a black eye for Florida state and local officials who committed $135 million to subsidize the construction of a state-of-the-art studio in Port St. Lucie, which the company closed last week. It was not immediately clear how much of the promised subsidies were paid, but Florida Governor Rick Scott had ordered a probe into the state incentives.
Digital Domain, like other industry players, is struggling with low margins as movie studios can pick from a range of vendors around the world to produce computer-generated images. Digital Domain raised $42 million in an initial public offering in November but said last month that it was looking at strategic alternatives and had hired Wells Fargo Securities LLC as financial adviser.
The company said in court documents that it was in breach of conditions on some borrowing.
"As a result of negative working capital, the company failed to meet the liquidity covenants and was running out of cash," Chief Restructuring Officer Michael Katzenstein said.
Former Chairman and Chief Executive John Textor, who is also the company's second-biggest shareholder, resigned last week, saying he was in "profound disagreement" with the decision to close the Florida studio.
As of August 28, Textor controlled about a quarter of Digital Domain. Private equity firm Palm Beach Capital is the company's largest shareholder with a 38 percent stake as of August 14.
Searchlight, which manages about $860 million, was founded in 2010 by senior partners from investment management firms Kohlberg Kravis Roberts & Co, the Ontario Teachers' Pension Plan and Apollo Global Management LLC.
Digital Domain listed Reliance Mediaworks Ltd., Legendary Pictures and Bell Technologies as among its largest unsecured creditors.
Digital Domain shares closed at 55.4 cents on Monday, giving it a market value of $24 million, down from about $400 million on May 1 when the stock traded as high as $9.16.