JS Communications Co., a South Korean entertainment and media company, has signed a letter of intent to acquire the assets of El Segundo-based Rhythm & Hues, the visual effects house that recently filed for bankruptcy protection from creditors.
JS Communications, a diversified entertainment and media company, on Thursday agreed to enter into negotiations to buy Rhythm & Hues, according to a document filed in U.S. Bankruptcy Court in Los Angeles.
Rhythm & Hues retained investment banking firm Houlihan Lokey Capital Inc. to solicit bids for Rhythm & Hues, which recently won an Oscar for its work on the Ang Lee movie "Life of Pi," and is one of Hollywood's premiere visual effects companies.
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JS is a so-called stalking horse bidder, one that is intended to encourage competitive bidding in an auction process overseen by the Bankruptcy Court. The company has received 20 bids from prospective buyers but JS is the only one that has been identified, according to the court records.
If a deal is reached, the court could approve a sale by March 29.
A purchase price has yet to be negotiated, but under the deal filed in court, JS would assume responsibility for a nearly $16-million loan extended to Rhythm & Hue by Universal Studios and 20th Century Fox.
The loan was part of the effects company's plan to avoid liquidation, enabling it to complete work on current projects, including “R.I.P.D.” and “Percy Jackson: Sea of Monsters.” Warner Bros., which is separately owed $4.9 million, is not providing any financing, the company has said in court filings.
Rhythm & Hues filed for bankruptcy protection under Chapter 11 of the federal bankruptcy code last month after laying off 250 employees.
The company posted a $22.5-million net loss in 2012 as revenue fell to $95 million, down from $121 million in 2011, court records state. Rhythm & Hues cited several factors, including a decrease in film production at Fox and Universal -- historically two of its largest customers -- as well as rising competition from rivals in Canada, Britain, Australia and New Zealand.
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