By Pam Martens and Russ Martens: October 17, 2017
Wall Street Bull Statue in Lower Manhattan
In 2013, when a division of CIT served as a joint lead arranger for a $370 million senior secured credit facility to the Weinstein Company, an executive of the lender, Kevin Khanna, issued a statement effusively praising the management of the Weinstein Company, stating:
“The Weinstein Co. is one of the premier Hollywood studios in the world and we are pleased to further expand our relationship with them through this recent financing. As a key player in the film financing sector, we pride ourselves in putting our knowledge to work on behalf of our clients to help them achieve their goals.”
Today, the Weinstein Company stands as the premier poster boy for mismanagement of its brand, reputation and franchise as sexual assault and sexual harassment charges, stretching over three decades, have been lodged against its co-founder and key executive, Harvey Weinstein. The charges have ricocheted around the world for almost two weeks with police investigations now open in New York and London. (Harvey Weinstein was fired by the Board a few days after the first story appeared in the New York Times and just two days before a second article would appear in the New Yorker, which added claims of rape by three women to the mushrooming scandal.)
Last year, Opus Bank was even more lavish in its praise for the Weinstein Company when it announced that it had provided $15 million of a $400 million senior credit facility which was “agented” by Union Bank.
Michael Allison, Co-President of Opus Bank and President of Opus’ Commercial Bank had this to say in a press release at the time:
“At Opus, we believe that by providing capital funding to mature, established and well run media and entertainment-related companies that are primed for disciplined and thoughtful growth and expansion, we can be a catalyst for the creation of new jobs and rebuilding of healthy, vital, and vibrant communities up and down the West Coast.”
But the Weinstein Company was the antithesis of a “well run media” company and was a complete failure at providing “disciplined” management. Its Board was aware of multiple prior settlements with women over charges of sexual misconduct by Harvey Weinstein but renewed his employment contract anyway.
In 2013, Tony Beaudoin, a Senior Vice President at the time at Union Bank, told the Wall Street Journal that “The Weinstein Co. has instilled the highest confidence level in the banking market since its inception.” His remarks were made in the context of describing a large new credit facility it was participating in for the company.
Major banks have been involved in these credit facilities for at least the past five years, raising the question as to what law firms did the due diligence on the loans.
Also being pondered around Hollywood is how honest Harvey Weinstein was being with the Hollywood Reporter last year when he told it that the company had “no debt.” Weinstein is quoted as follows:
“The TV company is worth $500 million, $400 million at the worst. There is no debt. If we let go tomorrow, selling the library and selling the TV, the company is worth $700 million, $800 million in a worst-case scenario. And there is no debt.”
Weinstein could have meant that there was no long-term debt or bonds outstanding. But if you owe money to banks, it’s debt that you have to pay back and it reduces the value of the company accordingly.
In the same interview, the Chief Operating Officer of Weinstein Company, David Glasser, said this: “We’ve had a $500 million credit line for five years, in place with 14 of the biggest banks in the world, led by Union Bank.”
Among the 14 biggest banks in the world are the mega banks on Wall Street. Banks like JPMorgan Chase, Bank of America, and Citigroup. The funny thing is, we haven’t heard anything about their owning up to having loans or a credit line outstanding to the Weinstein Company. Glasser may have been engaging in hyperbole about “the biggest banks in the world,” or it could be that Wall Street (which has had decades of sexual harassment and assault charges leveled against it) would rather keep its relationship with the Weinstein Company under wraps.
