LOS ANGELES – The Weinstein Co. said it will file for bankruptcy after the troubled studio founded by Harvey Weinstein ended talks to sell the company outside of chapter 11 to a group led by businesswoman Maria Contreras-Sweet, according to a report from Dow Jones.
The decision comes two weeks after New York Attorney General Eric Schneiderman filed a lawsuit against the studio alleging sexual harassment and civil-rights violations.
“While we recognize that this is an extremely unfortunate outcome for our employees, our creditors and any victims, the Board has no choice but to pursue its only viable option to maximize the Company’s remaining value: an orderly bankruptcy process,” the Weinstein Co. said in an email.
The studio had been close to a deal with Contreras-Sweet’s group before the lawsuit was filed and parties continued to discuss a deal after the legal action was taken.
The studio said in an email that it would prepare a bankruptcy filing “in the coming days.”
The board said in a separate letter addressed to Contreras-Sweet and billionaire Ron Burkle, who was backing the deal, that the most recent terms of a sale proposal they provided weren’t viable, Dow Jones added.
A recent draft from Contreras-Sweet and Burkle was incomplete and didn’t include interim funding that would be needed to pay employees, and would have saddled the company with additional liabilities, the letter said.
The board said it had been working with its advisers over the last several days to present an agreement for Schneiderman’s approval, the letter said.
Contreras-Sweet and Burkle couldn’t immediately be reached for comment, Dow Jones added.
The studio has been searching for a buyer that could keep the company out of bankruptcy as lawsuits against the company have piled up.
The proposed deal from Contreras-Sweet’s group was the only known offer that wouldn’t have required the Weinstein Co. file for chapter 11 protection.
Contreras-Sweet had proposed purchasing Weinstein Co. and installing a majority female board.
She founded Latino-focused Pro-America Bank, which was bought by Pacific Commerce Bank in 2015.
She also led the Small Business Administration under President Barack Obama, Dow Jones added.
Besides the New York Attorney General’s complaint, the Weinstein Co. also faces multiple lawsuits accusing the company of aiding and abetting Harvey Weinstein’s alleged misconduct.
Weinstein has denied allegations of nonconsensual sex.
A chapter 11 filing will halt lawsuits that have been filed against the studio.
Women who have sued the Weinstein Co. over Harvey Weinstein’s alleged sexual misconduct would be treated as low-ranking creditors – behind banks that have lent the studio money.
The studio would still be able to sell its assets in chapter 11 under the supervision of a judge, Dow Jones added in its report.
Proceeds from any sale in bankruptcy would be used to pay Weinstein Co.’s creditors.
Bankruptcy would also allow a potential buyer to acquire the studio’s assets free of liability, Dow Jones added.