Final Resolution Comes 14 Months After Studios Successful Emergence From Chapter 11 Bankruptcy.SAN FRANCISCOaChapter 11 is finally coming to a close for unsecured creditors of San Francisco-based (Colossal) Pictures. In a two-pronged turnaround from its May 96 bankruptcy declaration, (Colossal) successfully emerged from Chapter 11 in December 97 (SHOOT, 11/28/97, p. 1). And just last month, the animation/live-action/multimedia house informed its documented, unsecured creditors that they would receive partial monetary recompense.
Originally when (Colossal) filed for bankruptcy protection under the Chapter 11 reorganization provision, it appeared that unsecured creditors would be left holding the bag. That bag, though, is now at least a little lighter than what was initially thought. After final accounting, unsecured creditors can expect to receive 17.7 cents on the dollar, according to Michael Cunningham, president of Western Images, a San Francisco
CG/visual effects/post house that was owed a little more than $30,000 by (Colossal).
Cunningham, who served as chairman of (Colossal)s unsecured creditors committee, viewed the resolution as a positive development. To have some return after such a lengthy period of time is considered to be good in the case of a bankruptcy, he related. A lot of companies reorganize but ultimately dont have funds for secured, let alone unsecured creditors A (Colossal) could have easily just let this go and moved on. But the people at (Colossal) had some concern and caring about the creditors that were victimizedaand decided to pursue the matter.
That pursuit entailed litigation between (Colossal) and the Cleveland-based Rock And Roll Hall of Fame. The two parties ultimately reached an out-of-court settlement, with (Colossal) receiving an undisclosed sum from the Rock Hall (SHOOT, 1/9/98, p. 1). That settlement, confirmed Cunningham and (Colossal) CFO Jan Bauman, largely funded the partial payment to (Colossal)s unsecured creditors.
(Colossal) originally sued the Rock Hall in summer of 97, seeking $1.2 million in actual damages as well as $10 million in punitive damages (SHOOT, 7/25/97, p. 1). The lawsuitafiled in U.S. Bankruptcy Courts Northern District of California, San Francisco divisionacentered around a 94 agreement that called for (Colossal) to produce 27 films for audiovisual exhibits at the Rock Hall. (Colossal) contended that it incurred major losses due to improper action by the Rock Hall, including breach of contract, fraud and intentional interference in completion of a contract. The financial losses, claimed (Colossal), figured significantly in its having to declare bankruptcy.
However the Rock Hall steadfastly denied the allegations and claimed that it was damaged by (Colossal)s failure to fulfill contractual obligations. Both parties agreed to mediation, resulting in the financial settlement.
The settlement, though, didnt translate into immediate relief for unsecured creditors. (Colossal) first had to resolve other situationsaincluding a complex federal tax matterain order to determine if there would be money left over to distribute among unsecured creditors. That process took a little more than a year.
We were able to give more money to our creditors rather than to the IRS, related Bauman who joined (Colossal) just prior to its Chapter 11 filing, when the bankruptcy handwriting was on the wall. Bauman said the company is pleased to now have some closure to the situation. Im glad were able to pay what we have. Obviously, everyone wishes it could have been more. But 17.7 cents on the dollar is better than the average payout in situations like this.
Bauman added that she hasnt heard from the majority of unsecured creditors but those that shes talked with thus far have been complimentary of how we handled a difficult situation.
While considered by bankruptcy experts to be a significant amount in the long aftermath of a Chapter 11 declaration, 17.7 cents is still hardly overwhelming; the balance of 82.3 cents lost on the dollar clearly exacted a toll. As Northern California Bankruptcy Court records attest, (Colossal) left behind considerable financial wreckage, including approximately 200 unsecured creditors, many of whom are from the spot community. For example, as previously reported (SHOOT, 6/28/96, p. 1), post/effects house Click 3X San Francisco was the largest unsecured creditor, owed in excess of $290,000 by (Colossal). Next in line was (Colossal)s former West Coast commercial rep, Mary Vandamme, who had more than $80,000 in unpaid sales commissions. (Colossal) reportedly owed its unsecured creditors a total of about $1.8 million.
In the big picture, though, the bottom line is about as good as can be expected in a Chapter 11 scenario, said Cunningham who contended that the bankruptcy laws were used as ideally intended, helping to benefit (Colossal) and the community at large. The latter is rooted in the fact that in its 22-year history, (Colossal) has been a conduit of business for creative artisans and support services throughout the Bay Area. Thus numerous firmsaeven some of those burned by the Chapter 11 declarationahad a vested interest in seeing (Colossal) return to health and continue to be part of the industry landscape.
Part of (Colossal)s rebound can be attributed to it cutting an unwieldy overhead. For example, the studio currently has 23 staffers, a far cry from its pre-bankruptcy roster of 150 employees. Were running leaner now, going outside for additional people and services as needed, related Bauman.
While in Chapter 11 bankruptcy, (Colossal) still managed to attract noted projects. The shop turned out live action, animation, stop motion and/or combo fare for such advertisers as Coca-Cola via Edge Creative, Santa Monica, and Dennys Restaurants from Lowe & Partners/SMS, New York. These included a pair of SHOOT Top Spots in 97: Cokes Contraption and Dennys Toons: Skillet. And since emerging from Chapter 11, (Colossal) has lined up new commercial representation and broadened its ad clientele. For instance, (Colossal) teamed with Spumco, director John Kricfalusis Glendale, Calif.-based animation studio, to produce a pair of campaigns for Old Navy and its in-house agency, Old Navy Marketing, San Francisco.
The Old Navy fare was helmed by Ren & Stimpy creator Kricfalusi whos repped for spots on a nonexclusive basis by (Colossal). Other recent (Colossal)-produced jobs include the George Evelyn-directed Santa Japanimation for Blockbuster Video via Doner, Southfield, Mich., and a new primarily live-action Hallmark campaign directed by Flavio Kampah, a.k.a. Flavio, out of Leo Burnett Co., Chicago.
