Jun 25, 2020

Chapter 15 VFX huge Technicolor file among restructuring, blaming the coronavirus

Belts are tightening at Technicolor SA, the beleaguered conglomerate that houses an array of vfx subsidiaries. The company has filed for Chapter 15 in a bankruptcy court in Texas, amid a restructuring effort in its home country, France.

Technicolor is €1.44 (USD$1.59) billion in debt and facing insolvency. On Monday, it announced an agreement in principle with its creditors, which involves €420 million in new debt financing and a debt to equity swap (details here). Shareholders will be asked to back the proposal on July 20, and if they do, it will then go before a French judge for approval.

Chapter 15 in the U.S. does not represent a filing for bankruptcy. Rather, it provides a framework for dealing with issues that arise in cross-border insolvencies. The move is intended to protect Technicolor's U.S. assets from enforcement proceedings or direct appropriation by individual creditors.

Technicolor has three main divisions: DVD services, electronics, and and production services (vfx, post-production, and animation). The DVD arm has taken a battering in recent years; in its U.S. filing, the company pointed to the general shift from traditional media as one reason for its troubles.

But storm clouds are also hanging over its production units, which include MPC, Mr. X, The Mill, Mikros Image, and Technicolor Animation Productions. The filing also noted, “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.”

The company reiterated this argument in a statement:

Technicolor has invoked the pandemic before as a justification for changes, but the company's woes started before the virus hit. Here are some recent examples of upheaval at the company:

Between them, Technicolor's studios work on dozens of features and series every year. Recent projects include Ad Astra, The Lion King, Lady and the Tramp, The Call of the Wild, Dolittle, Alvinnn!!! and The Chipmunks, Elena of Avalor, and The Mandalorian. Forthcoming projects include The Spongebob Movie: Sponge on the Run, The Little Mermaid, and West Side Story.