WEBVTT - On Background: Who Buys Distressed Assets? 0:00:15.316 --> 0:00:22.876 Pushkin. Andy Mitchell could be called a doctor for business, 0:00:24.036 --> 0:00:25.836 but he's not the kind of doctor who does annual 0:00:25.876 --> 0:00:30.196 wellness checkups. Nope. Andy Mitchell's specialty is more alike emergency 0:00:30.236 --> 0:00:34.396 triage for very, very sick companies. You know they're bad 0:00:34.436 --> 0:00:36.276 off because of what people tend to call them at 0:00:36.276 --> 0:00:42.676 this stage, distressed Assets. Andy's firm, Lantern Asset Management, buys 0:00:42.756 --> 0:00:45.516 up businesses in immediate need of cash and willing to 0:00:45.516 --> 0:00:48.836 sell at bargain basement prices. I wanted to talk to 0:00:48.836 --> 0:00:51.156 Andy Mitchell because I'm pretty sure someone like him will 0:00:51.196 --> 0:00:53.756 be involved in some future stage of the company at 0:00:53.756 --> 0:00:57.196 the center of my next book, The now extremely Distressed 0:00:57.236 --> 0:01:04.036 Crypto Exchange FTX. Welcome to on background from Against the Rules. 0:01:04.716 --> 0:01:09.356 I'm Michael Lewis. It's possible that no one will be 0:01:09.436 --> 0:01:14.156 able or willing to revive FTX, which is now in bankruptcy, 0:01:14.196 --> 0:01:15.996 but I figured Andy Mitchell could tell me how a 0:01:16.076 --> 0:01:20.116 rehabilitation scenario might go down if a willing buyer came along. 0:01:21.356 --> 0:01:24.676 One thing I'm finding out about these background interviews, I 0:01:24.796 --> 0:01:27.196 just get interested in them in their own right. Apart 0:01:27.236 --> 0:01:31.796 from FTX, Andy's world intersects with huge stories in the news, 0:01:31.916 --> 0:01:34.276 but also junk food you probably ate as a kid. 0:01:34.756 --> 0:01:38.356 When something goes belly up, people seek him out. I 0:01:38.396 --> 0:01:41.196 asked him how he knows when to get involved. 0:01:46.036 --> 0:01:48.516 I like to say, look, you know, we identify companies 0:01:48.556 --> 0:01:52.596 that have a reason to exist, and the reason they're 0:01:52.596 --> 0:01:55.796 not performing is something you can identify that that can 0:01:55.836 --> 0:01:56.876 be fixed and understood. 0:01:57.876 --> 0:01:59.876 So you find the sick and the wounded and you 0:01:59.916 --> 0:02:02.236 try to fix them. But not all the sick in 0:02:02.276 --> 0:02:03.796 the wounded, just the sick in the wounded that they 0:02:03.796 --> 0:02:04.516 have hope. 0:02:04.436 --> 0:02:06.436 I said, I do a lot of gap analysis, right 0:02:06.676 --> 0:02:08.836 what should be happening and what is happening? And can 0:02:08.876 --> 0:02:13.036 you tafy the gap and a type of understanding of 0:02:13.396 --> 0:02:15.796 you know, and as you know, a big part of 0:02:15.836 --> 0:02:20.436 restructuring is do people really understand where they are and 0:02:20.516 --> 0:02:23.196 where they're going? Because denial is not just a river 0:02:23.236 --> 0:02:25.716 in Egypt r. It's the easiest thing to do as 0:02:25.716 --> 0:02:27.836 a business leaders to say no, no, no, it's it's 0:02:27.956 --> 0:02:30.196 it's the economy, it's COVID. I mean, it's it's the 0:02:30.236 --> 0:02:33.436 first thing that investors don't like when management just blames 0:02:33.436 --> 0:02:36.036 every external factor they can think of, and they so 0:02:36.156 --> 0:02:38.356 well do you really understand why it is you are 0:02:38.396 --> 0:02:40.236 not performing and can you deal with it. 0:02:40.956 --> 0:02:45.276 And do the things that you buy? Are they invariably 0:02:45.996 --> 0:02:50.396 in bankruptcy or are they sometimes not that far gone? 0:02:50.516 --> 0:02:52.396 So a lot of the companies that we get involved 0:02:52.396 --> 0:02:57.596 with are definitely troubled. The legal term bankruptcy judges like 0:02:57.636 --> 0:02:59.956 to use is you know you've entered a zone of insolvency. 0:03:00.196 --> 0:03:00.956 Right, So if. 0:03:00.876 --> 0:03:05.276 You're in a situation where you're unable to maintain a 0:03:05.316 --> 0:03:08.316 status quo or to realize your business plan, that's that's 0:03:08.396 --> 0:03:10.716 usually when we come in. And honestly, the one defining 0:03:10.756 --> 0:03:13.236 thing that brings us in most of time is the 0:03:13.356 --> 0:03:15.596 first thing I ever learned out of business school. 0:03:15.916 --> 0:03:16.556 Cash is king. 0:03:16.916 --> 0:03:21.076 So when liquidity becomes tight, that's usually when people start 0:03:21.076 --> 0:03:22.876 having to look for different solutions. If you have a 0:03:22.876 --> 0:03:25.156 lot of cash, it's amazing how long you can languish 0:03:25.156 --> 0:03:29.636 in non performance land. If you've got time and liquidity, 0:03:29.836 --> 0:03:31.236 you can work through a lot of things. But as 0:03:31.276 --> 0:03:34.156 soon as people start cutting off that lifeblood of any company, 0:03:34.156 --> 0:03:35.956 which is the cash that needs to pay its bills, 0:03:35.996 --> 0:03:38.916 they come to you really enter a different stage. And 0:03:38.956 --> 0:03:41.956 that's unfortunately, most time we get involved, whether it's in 0:03:42.036 --> 0:03:44.236 quart or out of court, it's the time at which 0:03:44.236 --> 0:03:46.956 the company realizes that in the not too distant future 0:03:47.236 --> 0:03:48.836 they're not going to be able to make their payments 0:03:48.836 --> 0:03:49.116 as they. 0:03:49.076 --> 0:03:52.276 Come do what would have been the first case? And 0:03:52.316 --> 0:03:54.276 what's the first time you saw something you said, this 0:03:54.316 --> 0:03:56.836 sick and wounded business can be repaired, and I'm going 0:03:56.916 --> 0:03:57.316 to buy. 0:03:57.196 --> 0:03:58.836 It, you know. I actually so. 0:03:58.996 --> 0:04:02.636 I was a company called Interstate Bakeries, if you remember, 0:04:02.636 --> 0:04:05.396 they made wonderbread and Twinkies and whatnot. 0:04:05.516 --> 0:04:06.436 And right around the. 0:04:06.436 --> 0:04:09.476 Time that Michelle Obama correctly came out and said, hey, 0:04:09.476 --> 0:04:13.636 we need to worry about childhood obesity, they had three 0:04:13.716 --> 0:04:16.436 billion dollars of sales, but really started to have a 0:04:16.476 --> 0:04:17.316 top line issue. 0:04:17.396 --> 0:04:18.956 What does that mean? A top line issue? 0:04:19.036 --> 0:04:21.356 I remember I was sitting in the room the first 0:04:21.356 --> 0:04:23.756 time I met with the CEO, and of course there's 0:04:23.756 --> 0:04:26.116 a plate of Twinkies in the middle room, and he said, 0:04:26.116 --> 0:04:28.716 you want a Twinkie? I said, no, absolutely not. He goes, 0:04:28.756 --> 0:04:33.796 that's the problem, not being twinkies. So it really, you know, 0:04:33.836 --> 0:04:36.876 it was fundamental. Now, the real problem with Interstate Bakeries 0:04:36.996 --> 0:04:39.516 was actually, if you look behind the scene, they were 0:04:39.516 --> 0:04:41.916 making three billion dollars, and yet they were losing one 0:04:41.956 --> 0:04:43.036 hundred million dollars. 0:04:42.836 --> 0:04:43.476 In cash flow. 0:04:43.956 --> 0:04:46.356 And it's because it cost them so much to distribute 0:04:46.356 --> 0:04:51.756 their product. It was a highly unionized workforce, and the 0:04:51.796 --> 0:04:53.996 problem was is that they had grown through acquisitions, so 0:04:54.036 --> 0:04:56.436 they'd acquired something like fifty bakeries in the United States. 0:04:56.676 --> 0:05:00.276 But each time they acquired a bankruptcy, they simply adopted 0:05:00.396 --> 0:05:03.516 or absorbed the existing union contract. So when I sat 0:05:03.556 --> 0:05:05.516 down with the teamsters, even they were troubled. They said, 0:05:05.516 --> 0:05:07.116 you know, Andy, here's the problem. We have fifty different 0:05:07.156 --> 0:05:09.396 contracts in this company, and so if you were draw 0:05:09.436 --> 0:05:11.436 a line on where we want to settle, you've got 0:05:11.436 --> 0:05:13.116 guys that have a better deal, guys that have a 0:05:13.156 --> 0:05:15.636 worse deal. So it's really difficult to herd cats here. 0:05:16.036 --> 0:05:18.676 So you know that that company had. 0:05:18.516 --> 0:05:20.236 A top line problem that could be managed. 0:05:20.436 --> 0:05:24.076 It had a cost structure issue that again you had 0:05:24.116 --> 0:05:26.436 to work through the unions and whatnot, but could be 0:05:26.476 --> 0:05:28.876 managed because when you looked at their competitors, you know 0:05:29.836 --> 0:05:32.916 they were doing ten fifteen percent margins and here we 0:05:32.916 --> 0:05:34.036 were at negative margins. 0:05:34.076 --> 0:05:38.356 There's something disturbing about the idea of every time someone 0:05:38.396 --> 0:05:41.236 eats a twinkie. The company that makes it is losing 0:05:41.276 --> 0:05:46.356 money too, Like is that good for anybody? Right? I mean, 0:05:46.356 --> 0:05:48.516 they're not even making a profit off the twinkies. They're 0:05:48.556 --> 0:05:52.596 sort of subsidizing the twinkies. That's news to me. So 0:05:52.156 --> 0:05:54.516 you're so this is the first problem you deal with 0:05:54.556 --> 0:05:55.396 on your own. 0:05:55.396 --> 0:05:57.956 Well, this is this is the first major target, you 0:05:57.996 --> 0:06:00.276 know that came up. Now, that probably was a bad 0:06:00.316 --> 0:06:03.156 one to bring up, because unfortunately it went through not 0:06:03.236 --> 0:06:05.596 only a chapter eleven, but it went through a chapter 0:06:06.156 --> 0:06:08.396 twenty two, which is the joking term in the industry 0:06:08.436 --> 0:06:10.676 for a second bankruptcy, and then finally it liquidated. 0:06:10.956 --> 0:06:13.156 So in the end it didn't end up working. 0:06:13.276 --> 0:06:14.356 It did not end up working. 0:06:14.676 --> 0:06:18.436 The guys that eventually bought it basically did what had 0:06:18.436 --> 0:06:20.396 to be done, which is they shut the whole thing down, 0:06:20.876 --> 0:06:23.236 tore up all the union agreements, and then once everything 0:06:23.316 --> 0:06:27.356 was still they took the brands, restarted it and made 0:06:27.396 --> 0:06:31.276 a huge profit. But unfortunately it took using the bankruptcy 0:06:31.276 --> 0:06:33.676 code to jettison all those union agreements and everything else, 0:06:33.676 --> 0:06:36.796 because it just no matter how deep. And that's a 0:06:36.796 --> 0:06:39.796 whole different series, is you know, dealing with collective bargaining 0:06:39.876 --> 0:06:41.436 and how to make it a win win for everybody. 0:06:41.916 --> 0:06:43.716 So that wasn't But that wasn't you. You didn't end 0:06:43.796 --> 0:06:44.916 up buying the Twinkie company. 0:06:44.996 --> 0:06:45.916 No, I didn't. 0:06:49.156 --> 0:06:52.196 Hold that thought. After a short break, we're going to 0:06:52.276 --> 0:06:56.196 hear all about a distressed asset Andy did buy, and 0:06:56.236 --> 0:07:08.116 it's distress which was considerable. We'll be right back. I'm 0:07:08.156 --> 0:07:12.276 back with Andy Mitchell, managing director of Lantern Asset Management. 0:07:13.356 --> 0:07:15.076 In this next part, I asked him about his most 0:07:15.076 --> 0:07:18.636 famously distressed asset. I want to guess what that was. 0:07:19.556 --> 0:07:21.516 Here's a clip from CBS This Morning. 0:07:22.236 --> 0:07:24.956 In twenty seventeen, New York Times reporters Jody Kantor and 0:07:24.996 --> 0:07:30.316 Megan Twey uncovered stories of Weinstein's alleged sexual harassment, igniting 0:07:30.436 --> 0:07:31.476 the me too movement. 0:07:32.676 --> 0:07:37.156 Let's talk about your experience buying Harvey Weinstein's company. So 0:07:37.236 --> 0:07:40.036 tell me how you stumble into that in the first place. 0:07:40.756 --> 0:07:43.996 Well, in that one, you had a pret identifiable problem, right, 0:07:44.036 --> 0:07:47.196 which is had a management issue. Jokingly say, well, glad 0:07:47.276 --> 0:07:49.436 you get into Weinstein. It's well, they had a management problem. 0:07:49.676 --> 0:07:53.236 So he gets charged with sexual assault. And then what happens. 0:07:53.436 --> 0:07:57.596 When the New York Times dropped their bombshell story right, 0:07:57.636 --> 0:08:01.156 it put in place a number of events that quickly 0:08:01.276 --> 0:08:04.636 escalated beyond control. Now, if you look at the Weinstein Company, 0:08:04.796 --> 0:08:06.716 it had a lot of problems before the New York 0:08:06.716 --> 0:08:10.676 Times did that story. This liquidity strained, It had a 0:08:10.716 --> 0:08:13.276 serial borrower of money, and even though it had a 0:08:13.316 --> 0:08:16.956 lot of successful movies, the US successful movies were bringing 0:08:16.996 --> 0:08:19.396 it down. I'd be like talking about a mutual fund saying, well, 0:08:19.436 --> 0:08:20.956 they have ten great stocks. 0:08:20.636 --> 0:08:22.276 And like, yeah, but they have fifty bad stocks. 0:08:22.796 --> 0:08:25.356 So unfortunately, you don't get to just talk about the 0:08:25.396 --> 0:08:28.076 ten positive ones, except maybe in Hollywood. 0:08:28.116 --> 0:08:30.036 So they were were they losing money? 0:08:30.356 --> 0:08:30.516 Oh? 0:08:30.516 --> 0:08:34.196 They were already in solvment before the situation when Harvey 0:08:34.196 --> 0:08:34.836 had erupted. 0:08:35.076 --> 0:08:36.716 I didn't realize that, Okay. 0:08:36.516 --> 0:08:40.716 The Weinstein Company, they're good at making movies, but definitely 0:08:40.716 --> 0:08:44.076 not great at contracts and accounting and whatnot. A number 0:08:44.076 --> 0:08:47.476 of different things were in disarray. But ultimately what got 0:08:47.476 --> 0:08:50.276 me to at a table was once the story broke, 0:08:50.796 --> 0:08:53.236 all the creditors started panicking because if Harvey was going 0:08:53.276 --> 0:08:55.956 to be removed from the company, what do you hate 0:08:55.996 --> 0:08:57.956 the man or like the man or love his movies. 0:08:58.156 --> 0:09:01.036 He was seen as the creative energy behind the entire thing, 0:09:01.636 --> 0:09:04.636 and without him, the belief was that there was no 0:09:04.676 --> 0:09:07.996 Weinstein Company, and so credits started to pull back, not 0:09:08.076 --> 0:09:10.476 to mention with what was going going on in terms 0:09:10.516 --> 0:09:13.156 of the negative reaction to Me Too movement, this global movement, 0:09:13.676 --> 0:09:16.756 it also became toxic. Right first there was a business problem. 0:09:16.836 --> 0:09:19.436 Then it became people didn't want to be associated with it. 0:09:19.476 --> 0:09:21.676 They didn't want to carry the movies and television shows 0:09:21.676 --> 0:09:24.916 on TV. They were worried about people boycotting it. 0:09:25.076 --> 0:09:27.796 And where are you physically when this happens? Where are 0:09:27.836 --> 0:09:28.236 you living? 0:09:29.396 --> 0:09:32.236 So I'm living in Dallas, Texas, right, the last place 0:09:32.236 --> 0:09:34.796 you'd expect to find somebody to go to Hollywood and invest. 0:09:35.356 --> 0:09:35.876 We got a. 0:09:35.796 --> 0:09:39.996 Call from actually one of our limited partners called up 0:09:39.996 --> 0:09:42.076 and said, Hey, you know a partner of ours as 0:09:42.116 --> 0:09:44.196 a movie that's going to get caught up in this. 0:09:44.276 --> 0:09:46.636 How do we get it out of this process? Oh? 0:09:46.676 --> 0:09:49.116 That was your way in. Someone called and asked how 0:09:49.116 --> 0:09:51.716 you could extract a single movie from the Weinstein Company. 0:09:52.236 --> 0:09:54.236 What movie was it? 0:09:54.236 --> 0:09:57.196 It was called War with Grandpa with Robert de Niro, 0:09:58.236 --> 0:10:00.676 So it had not been released yet, and you know, 0:10:00.716 --> 0:10:02.636 it's just the fear of the investor was, well, what 0:10:02.796 --> 0:10:06.756 happens if we get stuck into s bankruptcy and the 0:10:06.796 --> 0:10:08.796 movie doesn't get released and you know you've spent all 0:10:08.836 --> 0:10:10.516 this money making this movie, right, You've got all this 0:10:10.556 --> 0:10:12.316 money on the table. In fact, there was six movies 0:10:12.356 --> 0:10:14.476 stuck during the period that we bought. 0:10:14.476 --> 0:10:14.756 Another. 0:10:14.796 --> 0:10:18.556 One's called Upside, great movie, strangely about a turnaround guy. 0:10:18.636 --> 0:10:21.716 Brian Cranston plays a turnaround advisor. It's about a quadr logic. 0:10:22.196 --> 0:10:24.596 So this was a movie that wasn't yet done, but 0:10:24.636 --> 0:10:27.156 they had put considerable money into it. And even though 0:10:27.156 --> 0:10:29.796 you had Kevin Hart and Nicole Kidman a great cast, 0:10:30.396 --> 0:10:33.036 it became the cloud of uncertainty over the entire Weinstein, 0:10:33.076 --> 0:10:36.956 which is what if America boycotts this? So the creditors, 0:10:36.996 --> 0:10:39.396 everybody was in this perpetual state of fear. And so 0:10:39.476 --> 0:10:42.156 we came in and ended up meeting with a couple 0:10:42.196 --> 0:10:44.436 of parties that were said, look, this is a good business. 0:10:44.436 --> 0:10:48.036 It just needs a change of management and we don't 0:10:48.076 --> 0:10:50.516 deserve to lose years and years of work as a 0:10:50.516 --> 0:10:51.996 result of what Harvey did. 0:10:52.116 --> 0:10:55.396 So there was a process can we do it outside 0:10:55.396 --> 0:10:55.716 of court? 0:10:56.356 --> 0:10:58.836 I mean, does it have to be thrown into bankruptcy? 0:10:59.876 --> 0:11:01.676 Yeah? Does it? Does it have to go into bankruptcy? 0:11:01.876 --> 0:11:05.076 Was the kind of question de jure, and. 0:11:06.076 --> 0:11:09.076 Most people would rather do a deal outside of bankruptcy. 0:11:09.196 --> 0:11:11.276 What they don't realize is it's actually a very highly 0:11:11.276 --> 0:11:14.116 effective tool in order to help the company get back 0:11:14.116 --> 0:11:16.516 on its feet. And it's to me, it's the entire 0:11:16.556 --> 0:11:19.516 reason our bankruptcy code exists is that a company that 0:11:19.556 --> 0:11:23.036 continues to go and concern is most likely more valuable 0:11:23.036 --> 0:11:25.396 than a company that is liquidated and resolved. 0:11:25.636 --> 0:11:27.756 Which, so what did you do with Harvey Weinstein's business? 0:11:28.796 --> 0:11:31.116 So I took the position early on with a number 0:11:31.116 --> 0:11:32.716 of the members of the board and the advisor that 0:11:32.756 --> 0:11:34.876 there was no way to buy the company outside of bankruptcy. 0:11:35.596 --> 0:11:39.196 And the main reason was is when you buy a company, 0:11:39.556 --> 0:11:42.356 it's sometime inherits all of those claims and all those 0:11:42.916 --> 0:11:46.876 legacy aliabilities that exist at that time, and people were 0:11:46.916 --> 0:11:48.836 still trying to figure out daily, you know, what the 0:11:48.876 --> 0:11:52.756 liabilities were, who who was to blame, how much what 0:11:52.836 --> 0:11:55.916 Harvey did infiltrated it, whether or not there was hr claims, 0:11:55.916 --> 0:11:58.036 whether or not there was it was an internal and 0:11:58.076 --> 0:11:58.276 if you. 0:11:58.356 --> 0:12:00.636 And if you bought, if you bought it before bankruptcy, 0:12:00.716 --> 0:12:04.436 you'd inherit all those problems. And if anybody, anybody want 0:12:04.476 --> 0:12:08.276 to sue for anything Harvey Weinstein ever did, you'd be liable. 0:12:09.436 --> 0:12:12.636 That. That was my position, because every single day at 0:12:12.636 --> 0:12:16.716 that time, there was another claim popping up against the company, 0:12:16.756 --> 0:12:21.276 either nonpayment or the victims, and so there it was 0:12:21.316 --> 0:12:24.916 just an absolute It's like hitting a bee's nest. It's 0:12:24.956 --> 0:12:28.436 a swarm around this company of people making claims against it. 0:12:28.476 --> 0:12:30.276 And so to me it was a classic. 0:12:30.276 --> 0:12:33.156 It needed to go into bankruptcy just to stop the 0:12:33.196 --> 0:12:35.876 clock for a moment, take a deep breath, assess what's there, 0:12:35.916 --> 0:12:37.196 and then reorganize the company. 0:12:37.436 --> 0:12:39.916 What did you see in this company that was valuable? 0:12:41.076 --> 0:12:41.716 The library? 0:12:42.076 --> 0:12:44.196 I mean it was two hundred and ninety nine movies 0:12:44.476 --> 0:12:49.716 that America loved and actually I loved worldwide. 0:12:49.796 --> 0:12:51.356 Right. You had the Quentin Tarantino collection. 0:12:51.476 --> 0:12:54.516 You had movies like Kings Speech, you had The Butler, 0:12:55.156 --> 0:12:58.956 you had Silver Linings playbook, you had Project Runway television show, 0:12:59.036 --> 0:13:04.116 you had Yellowstone, and Hollywood took this position of nobody's 0:13:04.116 --> 0:13:05.796 going to watch this again because of what Harvey did 0:13:05.796 --> 0:13:09.316 everybody's going to boycott it across America. And this is 0:13:09.116 --> 0:13:11.796 this is tainted goods. What they didn't realize is people 0:13:11.836 --> 0:13:14.716 in Kansas and Houston and Dallas, they didn't even know 0:13:14.716 --> 0:13:17.036 who Harvey Weinstein was to begin with. You know, as 0:13:17.076 --> 0:13:19.156 I said, you know, usually when the credits are playing 0:13:19.156 --> 0:13:21.116 in the beginning movie, most Americans are still getting their 0:13:21.116 --> 0:13:24.116 popcorn or getting their seat. The concept to me that 0:13:24.156 --> 0:13:25.916 people weren't going to watch them, you know, weren't going 0:13:25.956 --> 0:13:28.396 to watch Paddington Bear for example, we about Paddington Bear, 0:13:28.716 --> 0:13:30.676 that my daughter wasn't gonna watch Paddington Or because of 0:13:30.756 --> 0:13:33.436 Harvey Weinstein. It was just ridiculous. I said, you know, 0:13:33.596 --> 0:13:35.556 and you could, and I knew in bankruptcy you could 0:13:35.596 --> 0:13:37.956 buy it free and clear of all the other claims, 0:13:37.956 --> 0:13:40.156 and you could separate the good from the bad, which 0:13:40.196 --> 0:13:43.076 is what bankruptcy at its heart it does. 0:13:42.916 --> 0:13:43.956 To maximize value. 0:13:43.996 --> 0:13:46.636 Is it lets somebody buy it without the worrying about 0:13:46.676 --> 0:13:49.756 well what about so and so, you know, gives them 0:13:49.756 --> 0:13:52.236 a format through the bankruptcy court in order to resolve 0:13:52.236 --> 0:13:54.596 their claims and disputes, and allows the company to go 0:13:54.636 --> 0:13:55.076 and survive. 0:13:55.156 --> 0:13:56.036 So I said, if we can just. 0:13:55.996 --> 0:14:00.116 Get the library out of this alone, there'll be sufficient value. 0:14:00.316 --> 0:14:02.636 Well, so tell me what happened in the bankruptcy, Like, 0:14:02.956 --> 0:14:05.516 how come there aren't dozens of people trying to buy 0:14:05.516 --> 0:14:07.956 this library? And how can you get it at a 0:14:07.996 --> 0:14:08.676 decent price. 0:14:09.356 --> 0:14:13.156 In March of twenty eighteen, we entered a bankruptcy with 0:14:13.316 --> 0:14:16.716 the company. Said here the company's filing bankruptcy, but don't worry. 0:14:16.756 --> 0:14:20.076 We already have a white night. They're going to acquire 0:14:20.116 --> 0:14:22.836 the asset. I set up a company called Land Entertainment 0:14:23.116 --> 0:14:25.596 as the vehicle to come in and buy it. And 0:14:26.516 --> 0:14:28.276 the number that people love the quote is, well, what 0:14:28.316 --> 0:14:30.596 could you read in the bankruptcy court? So the bankruptcy 0:14:30.636 --> 0:14:32.876 court said I bought was a stocking orse for two 0:14:32.916 --> 0:14:36.356 hundred and eighty nine million of cash. What people always 0:14:36.356 --> 0:14:38.476 forget is it's not just the cash you pay, it's 0:14:38.476 --> 0:14:42.196 also the liabilities you assume that matter. So, with all 0:14:42.236 --> 0:14:44.556 the claims that we assumed and everything else were probably 0:14:44.556 --> 0:14:45.876 an area of four un million. 0:14:47.676 --> 0:14:49.356 Did you assume any of the claims that might have 0:14:49.356 --> 0:14:52.596 been filed against Harvey. No, I'm just curious what claims 0:14:52.596 --> 0:14:53.276 did you assume? 0:14:53.716 --> 0:14:55.756 So what we were able to do is and it 0:14:55.836 --> 0:14:56.676 is all very public. 0:14:56.716 --> 0:14:59.196 So we went in and said, look, we're prepared to 0:14:59.196 --> 0:15:02.556 buy all the assets for X, and here are the 0:15:02.636 --> 0:15:06.996 claims that were prepared to assume. And there are certain 0:15:06.996 --> 0:15:08.676 claims that if you don't assume, you're not going to 0:15:08.676 --> 0:15:09.116 get approved. 0:15:09.236 --> 0:15:13.036 Is a stocking horse. So a stocking horse by model 0:15:13.156 --> 0:15:14.796 is to provide a floor bid. 0:15:14.996 --> 0:15:16.236 You're the first bid in an auction. 0:15:16.476 --> 0:15:18.556 You can I can always bid more, but you're not 0:15:18.596 --> 0:15:20.476 supposed to bid less as a stocking horse. So you 0:15:20.516 --> 0:15:23.076 come in with a floor bid and you say here's 0:15:23.116 --> 0:15:25.196 what I'm willing to assume, here's what I'm willing to pay, 0:15:25.516 --> 0:15:27.396 and that bid gets put together as an order and 0:15:27.396 --> 0:15:29.516 then gets put out there for all the other bidders. 0:15:30.156 --> 0:15:32.116 So I came out in March as a stocking horse 0:15:32.116 --> 0:15:34.316 with the company to say, hey, it's not going to 0:15:34.316 --> 0:15:36.756 be obliterated from the earth. There's a buyer here, they're 0:15:36.756 --> 0:15:39.036 going to hire the employees and there's going to be 0:15:39.076 --> 0:15:41.356 a plan. And then we entered the auction. What I 0:15:41.356 --> 0:15:44.836 didn't expect and I may hold a record, I don't know. 0:15:45.036 --> 0:15:47.876 You have to check with your bankruptcy historians. Ninety six 0:15:47.916 --> 0:15:53.076 parties objected to my bid as stocking horse. Why you know, 0:15:53.076 --> 0:15:55.316 when Meryl Street files in the chection to your bid, 0:15:55.476 --> 0:15:56.556 it tends to make news. 0:15:56.996 --> 0:15:57.196 Right. 0:15:57.236 --> 0:15:59.836 A number of people objected, saying, well, you're onored. He 0:15:59.876 --> 0:16:01.556 hasn't said what he's going to do with my claim. 0:16:01.996 --> 0:16:03.836 He hasn't said that he's going to assume my claim. 0:16:03.916 --> 0:16:04.556 I don't think that he. 0:16:04.556 --> 0:16:06.716 Has a right to buy the movie without so all 0:16:06.756 --> 0:16:08.036 those types of objections, right. 0:16:08.316 --> 0:16:10.356 Yeah, So Meryl's in a movie and she's got a 0:16:10.356 --> 0:16:13.276 piece of the movie, and she's still not seeing her cash. 0:16:12.756 --> 0:16:14.916 And somebody told her, hey, you know what, it's going 0:16:14.916 --> 0:16:16.876 through a bankruptcy. Somebody's buying it. If you want to 0:16:16.876 --> 0:16:18.596 get paid or you want to make a claim, now's 0:16:18.636 --> 0:16:21.356 the time. So there was a bit of a pileon 0:16:21.436 --> 0:16:22.876 and a lot of it was because the records were 0:16:22.916 --> 0:16:25.076 so bad that they didn't even know and to be 0:16:25.116 --> 0:16:30.236 honest with nobody had filed bankruptcy in this much of disarray. 0:16:30.756 --> 0:16:33.596 I mean, Weinstein had talent, they had paid in five years, 0:16:33.996 --> 0:16:36.396 but it was unclear about well did he just give 0:16:36.476 --> 0:16:37.156 him another movie? 0:16:37.196 --> 0:16:37.716 What did he do? 0:16:37.876 --> 0:16:40.236 Was there some other form of payment? So it was 0:16:40.356 --> 0:16:42.156 there was a lot of noise around the case that 0:16:42.396 --> 0:16:45.996 got debated in a bankruptcy court about who had a claim, 0:16:46.036 --> 0:16:47.556 what the amount their claim was, and whatnot. 0:16:48.036 --> 0:16:53.356 You're getting an education in Hollywood, yes, And what are 0:16:53.396 --> 0:16:58.156 your takeaways as someone who's a complete outsider walking into 0:16:58.156 --> 0:17:01.716 this place? What strikes you? How's it different than you 0:17:01.796 --> 0:17:02.516 might have expected. 0:17:02.676 --> 0:17:04.916 When people are losing money, the first thing they do 0:17:04.996 --> 0:17:08.276 is look for somebody to blame other themselves, Right, whose 0:17:08.316 --> 0:17:10.276 fault is it? Why am I not getting paid? You 0:17:10.316 --> 0:17:14.836 know who is getting paid? And so people start getting 0:17:14.916 --> 0:17:17.196 very upset about where they are in line, what claim 0:17:17.236 --> 0:17:19.556 they have learned, the difference between what they think they 0:17:19.636 --> 0:17:22.596 have and what they actually have, and contractual rights. And 0:17:22.956 --> 0:17:27.316 in Hollywood it wasn't just money, it was personal, right, 0:17:27.396 --> 0:17:29.356 So you know, I say money is the root of 0:17:29.396 --> 0:17:31.836 all evil, But then you add fame and well, the 0:17:31.916 --> 0:17:32.836 rules don't apply to me. 0:17:32.836 --> 0:17:34.636 I'm so and so. And it was interesting to watch 0:17:34.916 --> 0:17:35.636 Judge Walwrath. 0:17:35.796 --> 0:17:38.916 Mary Walwrath was a presiding judge who's been on the 0:17:38.916 --> 0:17:42.676 bench in Delaware a long time, very experienced practitioner, and 0:17:42.916 --> 0:17:44.556 people would come in and they kind of had this 0:17:44.956 --> 0:17:45.716 do you know who. 0:17:45.596 --> 0:17:47.156 My client is? She? 0:17:47.316 --> 0:17:48.756 He was very like, I don't really care who your 0:17:48.796 --> 0:17:51.676 client is. The bankruptcy code doesn't have exceptions for you know, 0:17:51.756 --> 0:17:52.516 oscar winners. 0:17:52.596 --> 0:17:53.276 I'm sorry. 0:17:53.516 --> 0:17:55.796 So I think that was the most interesting thing and 0:17:55.916 --> 0:17:59.076 probably the biggest thing that we People like, what do 0:17:59.156 --> 0:17:59.796 you expect? 0:17:59.836 --> 0:18:00.316 I said, I don't know. 0:18:00.356 --> 0:18:02.076 I thought, this is going to buy a movie collection 0:18:02.116 --> 0:18:03.836 out of bankruptcy and do what I do. 0:18:04.196 --> 0:18:06.556 Right, right, So what happened in the auction? Did you 0:18:06.796 --> 0:18:08.436 we able to buy it at the floor price? Or 0:18:08.436 --> 0:18:09.876 were there are other people who came in a bit. 0:18:10.196 --> 0:18:13.996 I paid below what my opening price was, which if 0:18:14.036 --> 0:18:16.076 you'd asked me beforehand, I said, I've never seen that 0:18:16.196 --> 0:18:19.196 happen that you actually the stocking horse actually lowered the 0:18:19.196 --> 0:18:21.556 bid and still closed the deal. And there was a 0:18:21.676 --> 0:18:24.756 very tense point right before the auction because there was 0:18:24.756 --> 0:18:26.796 a number of guys bidding, but people were trying to 0:18:26.796 --> 0:18:28.996 come in and bid on individual films, right, somebody wanted 0:18:28.996 --> 0:18:31.356