The head of the South Korean firm looking to purchase visual effects company Rhythm & Hues revealed that he intends to keep the company going, according to a report by Variety.
“I have no intention to liquidate,” said David Shim, managing partner of JS Communications, which got approval from the courts Friday for a “stalking horse” bid for the bankrupt visual effects firm. “Rhythm & Hues should be taken care of. It’s in the common interest of the motion picture industry to support it for its skillset and what it can do for the industry going forward.”
Shim said R&H’s problems were “the fault of the industry as a whole” but added that the company’s financial management had been “a little lacking.” He has been on-site regularly at R&H’s offices and JSC appears to be the company’s preferred buyer in the upcoming bankruptcy auction.
“It’s a tragedy that a company of this quality, winning an Oscar just a few weeks back is in bankruptcy,” Shim said, referring to the Academy Award for visual effects given to the effects-laden Life of Pi. “Something’s wrong there. If you are that good and you are bankrupt, that just doesn’t make sense.”
JS is a privately held South Korean company that deliberately keeps a low profile. Shim called it “a diversified multi-tiered media and entertainment firm,” whose initiatives span movie production, movie financing and broadcasting.
The company’s principals are Shim and CEO Jae Hwan Lee. Shim was a founder, managing director & CEO of CJ Entertainment, one of Korea’s biggest entertainment companies, and was a Warner Music Korea and EMI executive. He was involved in CJ’s original investment in DreamWorks SKG in the mid-1990s. Hwan Lee is grandson of the founder of Samsung Group.
The only other major VFX firm to go through Chapter 11 bankruptcy, Digital Domain, received a $15 million stalking horse bid from an American investment firm that did not win the auction. DD was acquired by Chinese firm Galloping Horse and Indian firm Reliance for a total of $30.2 million.
Separately, Reliance acquired Burbank-based VFX and post house Lowry Digital, and changed its name to Reliance Mediaworks. Previously, Prime Focus of India acquired Frantic Films and Post Logic of Hollywood to form Prime Focus North America.
Rhythm & Hues already has two facilities in India, one in Malaysia and another in Taiwan. Those locations are not technically part of the bankruptcy auction, as they’re owned by distinct corporations — but those corporations are owned by the same owners as R&H. “At this time there is no plan to change anything about those facilities once we come out of bankruptcy,” said R&H principal Lee Berger.
Court filings indicate that more of R&H’s work will be done at those Asian facilities. R&H founder John Hughes warned employees last week that the company’s El Segundo, CA, headquarters would likely reduce staff.
Peter Fishman of investment bank Houlihan Lokey, which is handling the sale of R&H, reportedly said the Korean firm’s bid would assume the $16 million in loans from Fox and Universal and put another $1 million into the company. Those loans have kept the doors open at R&H during bankruptcy. Should it succeed in acquiring R&H, JS intends to put more funds in as working capital, not shut the company down or liquidate it.
The stalking horse bid sets the floor for future bids and ensures there is a buyer even if no other bidders enter the auction. Houlihan Lokey says it has received 20 NDAs from parties interested in bidding, and it expects about 10 to do on-site due diligence. JSC will submit the “Asset Purchase Agreement” for its bid by March 19, while other bids must be submitted by March 22.
The auction for R&H will be held the morning of March 27, followed by a court hearing the next afternoon to confirm the results of the auction. If all goes as planned, the sale would be concluded by March 29.
The court also issued an order preventing shutoff of utilities during the bankruptcy and authorized R&H to pay “in its discretion” back wages due from before the bankruptcy filing.