Industry Icon Rhythm and Hues Revived in Transaction with an Affiliate of Prana StudiosApril 15, 2013 – Article
After its recent financial woes and bankruptcy filing, Rhythm and Hues, the fabled animation/VFX studio, multiple Oscar winner and visual effects provider for Life of Pi, today closed a transaction with an affiliate of Prana Studios that will revive the troubled studio. The acquisition of R&H’S assets by Prana affiliate 34x118 HOLDINGS, LLC, will enable R&H to preserve jobs in the US and Asia, and will ensure the continuity of an iconic industry player.
The sale comes just seven weeks after the company’s bankruptcy filing and a sale process that stretched from New York to LA and across the Pacific to interested bidders in China, Taiwan, Korea and India. While sales of distressed companies in bankruptcy generally happen quickly, R&H’s will go down as one of the fastest – 49 days from start to finish.
Peter S. Fishman, Director at investment bank Houlihan Lokey, who led the firm’s team from Houlihan’s Distressed M&A and Communications & Entertainment groups in pursuing and consummating the transaction, commented, “It has been a privilege to be part of an effort that has ensured the continuity of an industry icon and a unique artistic resource in the entertainment business. We are very happy that jobs in the U.S., and indeed around the globe, will be preserved. We look forward with pride to R&H’s future achievements under the stewardship of its new owner, which is committed to maintaining the standards and quality of work that has made the company so successful.”
“This was a sophisticated and complex Chapter 11 handled in a much accelerated time frame,” said Brian L. Davidoff, head of the Bankruptcy Group of Greenberg Glusker Fields Claman & Machtinger LLP. Along with Greenberg Glusker partner Bob Baradaran, Davidoff served as R&H’s counsel and led the firm’s team of bankruptcy, corporate and real estate lawyers. Baradaran commented “As long-term counsel to the studio, we understood their larger business goals and were able to structure a solution that met the needs of the studio and its creditors, and will establish its sound path for the future.”
Also making major contributions to the successful effort were R&H’s Chief Restructuring Officer, John Hedge, from Scouler and Company, a financial restructuring, turnaround and crisis management firm, and Gary Klausner, of bankruptcy boutique Stutman, Treister & Glatt, representing the Official Committee of Unsecured Creditors appointed in R&H’s bankruptcy case.
Universal and Fox studios provided financing to R&H during its bankruptcy case and, in an unusual move, made that financing assumable by a potential buyer in order to assist the efforts of the company to find an acquirer that would assure R&H’s continued operation. As part of the sale transaction, Fox and Universal also agreed to release their liens on an anticipated $5m, or more, of proceeds from an upcoming real estate sale, and allow those proceeds to be used to pay other creditors, the majority of whom are past and present employees. Universal and Fox were represented in the R&H matter by Richard L. Wynne, Joshua M. Mester and Lori Sinanyan, all with Jones Day’s LA office.
Consideration in the transaction totaled close to $30m, comprised of cash and proceeds from the upcoming real estate sale, plus the buyer’s assumption of both pre and post bankruptcy debt to the studios, as well as the assumption of other designated claims of various creditors, including those of current and past employees. The transaction was the principal objective of R&H’s bankruptcy case, and its completion will facilitate the company’s ultimate exit from bankruptcy.