After 26 years and five owners, the rights to make future "Terminator" movies have landed in the hands of a Santa Barbara hedge fund called Pacificor.
A federal Bankruptcy Court judge awarded Pacificor the rights Wednesday over heated objections from Sony Pictures Entertainment Inc. and Lions Gate Entertainment Corp. The two companies had bid together in a controversial auction held Monday evening.
Pacificor purchased the rights from Halcyon Group -- the bankrupt production company behind last year's "Terminator Salvation" -- for $29.5 million plus $5 million for each sequel produced.
The hedge fund, which had backed Halcyon's acquisition of the rights three years ago, agreed to bid as part of a deal with the production company to forgive a disputed debt of about $38.1 million. Halcyon had denied it owed the debt.
"Our bid was the highest and best bid," said Pamela Webster, Sony's attorney. "The only reason that bid wasn't accepted is because the auction had been rigged by the settlement agreement."
Attorneys for Halcyon, Pacificor and a committee of other creditors that endorsed the deal contended that the bidding procedure was fair.
"Sony and Lions Gate together had ample opportunity to win," said Kevin Shultz, senior managing director of FTI Consulting, who managed the auction on behalf of Halcyon.
According to Halcyon's description of the auction, filed with the court, Sony and Lions Gate made a joint bid of $36.5 million on Monday. However, that offer contained no additional compensation for each sequel produced, which Halcyon considered crucial because that additional money would be needed to pay other creditors besides Pacificor.
"I am sympathetic to calls that this has been an unfair process . . . but I don't agree," Judge Ernest W. Robles said in his ruling. "What ultimately matters is a dollars-and-cents determination of what makes sense from the perspective of all the parties that have a significant amount of money at stake. That has happened here."
Despite the rancor in court, Sony and Lions Gate have been given an exclusive window by Pacificor to negotiate to produce and distribute the next "Terminator" movie, according to a person familiar with the talks. With no experience in film production, Pacificor said it would have to find partners to make future films.
"We expect there to be a fair amount of interest," said Wayne Flick, a lawyer for the hedge fund. "We know this is a very valuable franchise, and in the coming weeks, we will be considering all of the various options."
Spokespeople for the two studios declined to comment further.
Since the first "Terminator" movie, starring future California Gov. Arnold Schwarzenegger, was released in 1984, the holders of the franchise rights have included director James Cameron, producer Gale Anne Hurd, producers Mario Kassar and Andy Vajna and Halcyon co-Chief Executives Derek Anderson and Victor Kubicek, who were Hollywood neophytes before obtaining the "Terminator" rights in 2007.
In August, three months after "Salvation" was released, Halcyon filed for bankruptcy protection because it was unable to pay the disputed debt to Pacificor, which financed its initial purchase of the rights and much of its operations.