Update: Technicolor issued a statement about the restructuring process it is undergoing in France. The statement explains that the legal maneuver is meant to allow the company to implement its new financial structure with only 2/3 of its lenders consent, rather than the 100 percent normally required.
“Like many companies in the media and entertainment industry, we have been severely impacted by the COVID-19 global pandemic. On Monday, June 22nd, we announced that we had reached an agreement in principle with our lenders on a new financial framework for our long-term sustainability. It is the financial framework from which we will build a stronger future as a company- and in turn become an even stronger partner to our clients. That plan includes the infusion of €420 million of new money into the company and deleveraging,” the statement reads.
“Our new financial framework, and the approval processes necessary to implement it, will not affect our operations. Delivering superior service and innovative solutions to our clients is our priority – as is maintaining the strong relationships we have with them.”
Earlier: Technicolor SA, the French parent company behind major VFX studios and post-production houses, is facing insolvency and is seeking to restructure some of its $1.58 billion in debt. The move comes after the Technicolor-owned Moving Picture Company shuttered its Vancouver office suddenly in December, following a decade of financial hardships.
Technicolor on Monday filed for Chapter 15 in U.S. bankruptcy court in Texas. The filing comes as a French court is supervising a restructuring process similar to Chapter 11 bankruptcy protection in the US. The US case seeks to ensure the French plan is followed stateside and to avoid disruptions that could derail it.
Technicolor plans to fix its ails by obtaining €420 million ($473 million) in new debt financing and a reduction of its existing debt by up to €660 million ($743 million). If shareholders approve the plan on a July 20 meeting, the proposal will go before a French judge for approval.
“Among other factors, a global shift away from traditional media consumption led to a decline in revenue from traditional consumer electronics and DVD manufacturing. Global shortages of components used in manufacturing consumer electronics have further contributed to Technicolor’s strained liquidity situation. Compounding matters, the COVID-19 pandemic has caused theatrical releases to be put on hold and production timelines to be pushed back, significantly depressing Technicolor’s revenue from production services,” reads the US bankruptcy filing.
Technicolor, which operates in 27 media markets globally, has three primary divisions: electronics, production services, and DVD services.
Its electronics division, which accounts for 52 percent of its revenue, makes technology for delivering content to consumers’ homes, such as modems and streaming devices. Its clients include cable companies like Charter and Comcast.
Its production services division includes VFX, animation, and post-production services for film, TV, advertising, and video games, operating under brands including the Moving Picture Company, Mikros Animation, and The Mill.
Last year they worked on some 100 theatrical features, including “The Lion King” and “1917,” which won MPC the Oscar for Best Visual Effects this year. Its subsidiaries also worked on some 300 series including “Big Little Lies” and contributed work to some 4,800 commercials. The company expects demand for this division’s services to continue to grow.
Its DVD division manufactured over 1 billion discs last year for major studios and smaller distributors. Though demand for physical media continues to decline along with this division’s revenue, the company wrote in court filings that it should be well positioned to take advantage of the narrowing market.
The restructuring effort comes after a decade of hardship for Technicolor. The company, previously known as Thomson SA, underwent a similar restructuring in 2010 after which it adopted the Technicolor name. (Thomson acquired the former Technicolor a decade earlier).
Last December, the company and its former CEO Frederic Rose were indicted in France on charges of fraud and breach of trust in connection with its acquisition of Quinta Industries in 2012.
Around the same time the Moving Picture Company shuttered its Vancouver office suddenly in December. Artists working out of that office had worked on the redesign of “Sonic the Hedgehog.”