Rhythm & Hues Belongs to Prana; Judge Approves Sale

Brent Lang & Pamela Chelin
The Wrap

Rhythm & Hues belongs to an affiliate of Prana Studios.

A California bankruptcy court judge approved the sale of one of the visual-effects industry's most respected firms on Friday afternoon, ending a tumultuous auction process for the financially troubled company.

The deal is valued at roughly $18 million. That breaks down to  $1.2 million in cash and roughly $16 million in assumed liabilities, Brian Davidoff, an attorney for Rhythm & Hues told TheWrap.

Prana, an Indian-American visual effects company, beat out at least two other bidders for the rights to own Rhythm & Hues. Since it started in 1987, Rhythm & Hues has won awards and industry esteem for spinning fantastical creations in films like "Babe" and "Life of Pi."

One of the main bidders was Prime Focus, an individual with knowledge of the bidders told TheWrap. The India-based visual-effects company tried to acquire Rhythm & Hues shortly before it filed for Chapter 11 protection in February, but could not put a deal together in the two week time frame it was given. 

The other was a Chinese company, the individual said. The Los Angeles Times reported Thursday that China Lion had emerged as the lead bidder for Rhythm & Hues, but a spokesman for the company emphatically denied that it had participated in the bidding.The bid came not from China Lion, according to an individual with knowledge of the company, but from Brave Vision. Jiang Yanming, president of China Lion, is an investor in Brave.

Prime Focus objected to the sale in court, arguing that it was not given an opportunity to submit a final bid after Prana was brought into the process at the eleventh hour Thursday.

Its Oscar-winning accomplishments were not enough to inoculate Rhythm & Hues from a fiercely competitive business; one that has been upended in recent years by a fixed bidding process that squeezes profit margins. The California-based company has struggled to compete in a globalized environment that has seen contracts shipped to countries like Canada and the United Kingdom that offer more generous subsidies.

When Rhythm & Hues filed for bankruptcy protection in February, it reported that it had $27.5 million in assets and roughly $33.8 million in liabilities.

As the company has been mired in Chapter 11, three studios have helped it meet its payroll obligations and continue working on a number of projects. All told, Legendary Pictures, Universal Studios and 20th Century Fox Studios, the three in question, have extended about $20 million in loans during the process.

More to come...

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