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September 1, 2020 – The Debtors filed their First Amended Plan of Liquidation and a related Disclosure Statement [Docket No. 2952 and 2953, respectively]; and further filed a blackline showing changes to each document as filed on July 1st [Docket No. 2954]. The amended Plan now embodies a global settlement (the "Global Settlement") which "provides mechanisms by which the universe of Tort Claims related directly or indirectly to the alleged misconduct of Harvey Weinstein, including, but not limited to the Sexual Misconduct Claims, shall be resolved, released, discharged, and enjoined…"
Central to the Global Settlement are the Debtors' insurers who will provide $35.2mn to shed themselves of any further involvement/liability. The $35.2mn is to be divided into three pots of (i) $17.1mn to fund the "Sexual Misconduct Claims Fund," (ii) $8.4mn to fund a "Liquidation Trust" and (iii) $9.7mn for defense costs incurred by the Debtors and their directors and officers (including Robert Weinstein, but not Harvey Weinstein himself).
The Sexual Misconduct Claims Fund will be the sole source of funding to pay out all tort claims relating to sexual abuse claims against Harvey Weinstein. Victims can choose to pursue their claims elsewhere, but if they want to share in the $17.1mn, they must agree to releases. For a full share, a victim will be required to release everyone involved (including Harvey Weinstein). If a claim holder chooses not to release Harvey Weinstein, but does release everyone else (eg Robert Weinstein and the Debtors' board) their share is reduced to 25% of what would otherwise be allotted for a full release. No release, no participation.
The Disclosure Statement [Docket No. 2953] reads: “The Debtors propose the First Amended Plan for the resolution and satisfaction of all Claims against and Interests in the Debtors. The First Amended Plan contemplates, first and foremost, the comprehensive settlement of various Claims, including those at issue in a multitude of litigations pending in various courts (impacting the Sexual Misconduct Claims described herein) between and among sexual misconduct claimants, the Debtors, Harvey Weinstein, Robert Weinstein, other former members of the board of representatives of and/or directors and officers of the Debtors, the Office of the New York Attorney General (the ‘NYOAG’), and numerous insurance companies that issued directors and officers and general liability insurance policies to the Debtors prepetition. The Debtors believe the First Amended Plan represents the most favorable recoveries attainable under the circumstances and provides for the fair and equitable allocation of the insurance proceeds and the Debtors’ remaining business assets to be distributed to creditors.”
The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement):
- Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is [$●].
- Class 2 (“Secured Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is [$●].
- Class 3 (“Secured Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. The estimated recovery is [$●].
- Class 4 (“Sexual Misconduct Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is [$●] and the estimated recovery is –%. On the Effective Date, pursuant to the terms and conditions of the First Amended Plan, (i) all Sexual Misconduct Claims shall be released as against the Released Parties pursuant to the terms and conditions of the First Amended Plan; (ii) the Sexual Misconduct Claims Fund shall be administered, processed, settled, resolved, liquidated, satisfied, and distributed in accordance with the terms of the First Amended Plan, the Plan Support Agreement, and the Sexual Misconduct Claims Fund Procedures; and (iii) in the event the amount of the Sexual Misconduct Claims Fund is insufficient to pay the full Liquidated Value of all Sexual Misconduct Claims, each Holder of a Sexual Misconduct Claim shall receive their Pro Rata share of the Distributable Cash from the Sexual Misconduct Claims Fund. After a Sexual Misconduct Claim is Allowed and liquidated in accordance with the Sexual Misconduct Claims Fund Procedures, Holders of such Allowed and liquidated Sexual Misconduct Claims shall have the option to release Harvey Weinstein or to not release Harvey Weinstein and pursue an action against him (but not any Released Party) in another court of competent jurisdiction. Holders of Sexual Misconduct Claims who do not affirmatively elect to release Harvey Weinstein shall receive 25% of the Liquidated Value of their Sexual Misconduct Claims in consideration of the release of their potential Sexual Misconduct Claims against the Released Parties, and Holders of Sexual Misconduct Claims who affirmatively elect to release Harvey Weinstein shall receive the full Liquidated Value of their Sexual Misconduct Claims. In the event the Sexual Misconduct Claims Fund is insufficient to pay the full Liquidated Value of all Sexual Misconduct Claims, each Holder of a Sexual Misconduct Claim shall receive their Pro Rata share of the Distributable Cash from the Sexual Misconduct Claims Fund, and with respect to Holders of Sexual Misconduct Claims who do not affirmatively elect to release Harvey Weinstein, such Holder’s distributions shall be 25% of the Liquidated Value (with Pro Rata reductions applied) of such Holder’s Sexual Misconduct Claims.
- Class 5 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $150mn and the estimated recovery is –%. Holders of Allowed General Unsecured Claim are expected to receive less than a 2% recovery in cash on account of such Allowed General Unsecured Claims.
- Class 6 (“Intercompany Claims”) is impaired, deemed to reject, and not entitled to vote on the Plan.
- Class 7 (“Interests”) is impaired, deemed to reject, and not entitled to vote on the Plan.
The Global Settlement
The Disclosure Statement provides: "The Settlement is the cornerstone of the Plan insofar as it provides a comprehensive settlement of the claims and pending lawsuits arising from Harvey Weinstein’s misconduct, and disputes over the Insurance Companies’ obligations under various insurance policies potentially providing coverage for such claims. Of the approximate $35,214,882.30 Settlement Amount being paid by the Insurance Companies on behalf of the Released Parties and Harvey Weinstein, approximately $25,471,830.30 will be applied to satisfy claims of creditors, comprised of $17,064,525.30 to be paid to the Sexual Misconduct Claims Fund and $8,407,305 to the Debtors’ estates to be distributed to satisfy in full unpaid administrative and priority claims and make a pro rata distribution to general unsecured creditors in Class 5.
The Former Representatives Defense Costs do not provide for reimbursement of any defense costs and expenses incurred by Harvey Weinstein. In addition, the Insurance Companies, upon the Effective Date, shall be deemed to withdraw (or waive with the consent of the Committee) their proofs of claim filed against the Debtors."
Events Leading the Chapter 11 Cases
The Disclosure Statement notes: "In fall 2017, a series of articles revealed multiple allegations of sexual harassment and sexual assault by multiple women, spanning nearly three decades, against Harvey Weinstein – the Company’s co-founder. After the allegations were asserted, the Company’s board undertook an independent investigation of Mr. Weinstein using outside counsel and terminated his employment.
In the ensuing months, numerous lawsuits were filed against Harvey Weinstein, many of them naming the Debtors, Robert Weinstein and other current and former officers, directors, and board representatives of the Debtors.
As stated above, the allegations against Mr. Weinstein produced a swift response from multiple contract counterparties – studios, actors, production companies, and vendors – that hindered the Company’s ability to operate and drastically reduced its liquidity.
Faced with the disintegration of its business in the face of the allegations against Harvey Weinstein, the Debtors engaged an investment bank to explore an overall financial restructuring, including a potential sale of substantially all of the Company’s assets. Initial sale and rescue finance efforts were unsuccessful and the Debtors were forced to sell certain film rights to improve liquidity prior to the Petition Date.
In November 2017, the Company attempted to attract additional bidders and expanded its marketing efforts. At the conclusion of its prepetition sale process, the Company’s board of directors moved forward with a bid from a consortium of investors that included, among others, Lantern Asset Management LLC (who would go on to purchase substantially all of the Debtors’ assets after the Company filed for bankruptcy). Because of the potential liability arising from previously filed cases against, inter alia, Harvey Weinstein and the Company related to Harvey Weinstein’s alleged sexual misconduct and because of the potential liability arising from subsequently filed cases related to the same, the Company was unable to finalize an agreement with the consortium.”
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