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It would appear that the deal might be dead. But in light of the short history between these two entities they might still pull off the deal.

Anyone have any opinions about Image? Does anyone think that they've found a buyer? Unless they get another extension from their creditors or find a buyer, the company will end up defaulting on their debt and be could bankrupt in a couple weeks. (From what I understand) I hope Criterion at least are in the know and can get another distributor to handle forthcoming releases if Image goes bankrupt. January and February releases look awesome and I don't want anything to end up getting delayed just because Image Entertainment is on life support.

Yeah, if they don't have the cash to make a $4 million payment on a $15 million note they may have some issues...but they still made a profit. In any event, I doubt that creditors wouldn't be willing to work with them. Anyone with financial acument who can parse the article at the link?

EDIT: Another article regarding financial problems at Image can be found here.

SECOND EDIT: For whatever it's worth, "DVD revenue for the quarter was down 12.6% to nearly $24.4 million, while Blu-ray Disc revenue was up 150% to $2.5 million." I'm not sure whether or not similar ratios are being reflected on the balance sheets of other media distributors. But, at least in Image's case, increases in Blu-Ray are not offsetting losses in the DVD area.

It seems that i have to get all the Image discs that i kept delaying until now.

The creditors already gave Image an extension to Dec.15 to announce a buyout or pay up. The money was due in November. Even if they do find a buyer, they only have till January to fork up the 4 million plus interest. Image has stated they don't have the cash.

Insider selling, share price in the toilet, board of directors resigning, etc. spells Chapter.11, IMO. Unless anyone sees a bright side? I dunno.

If I was a company and wanted Image's assets, why would I negotiate a buy out? To pay a premium on outstanding shares as well as take on huge debt load? Why bother when you can probably purchase the assets you want dirt cheap when either Image or the banks start liquidating key assets.

ianungstad wrote:If I was a company and wanted Image's assets, why would I negotiate a buy out? To pay a premium on outstanding shares as well as take on huge debt load? Why bother when you can probably purchase the assets you want dirt cheap when either Image or the banks start liquidating key assets.

I'm not savy on financials, but what interest does a bank have in liquidating the assets...especially in today's market. Image is more valuable as an ongoing concern than the sum of the parts sold at liquidation prices. My sense is that something will be worked out.

They may even sell the company dirt cheap, if someone is willing to pay the debt afterwards.

I don't know if the exact same logic applies here, but imagine you have a house worth $300,000, which you owe the bank $100,000 on, and the bank has completely given up hope of ever collecting this money from you. They will kick you out of the house, auction it off to the highest bidder, and be happy to get just the $100,000 they are owed out of it.

If the business has already proven itself a failure as a going concern, like a bird with a broken wing, the bank is not going to be interested in nursing it back to health, providing it warmth and encouragement until it can one day fly again. No, they are going to sell that bird at the going gimp bird rate, and instead, nurse that shiny new nickel, providing it warmth and encouragement until it can one day be worth six cents.

I'm not necessarily disputing the points Swo and Perkizitore are making, but there's a big difference between a house (which typically is the only collateral securing a loan) and an ongoing business (which in this case may have little substantial physical assets serving as collateral). Sure, the holder of the note can get a judgement in the event of default and then seek to enforce the judgment by seizing assets, selling off, etc.

But inasmuch as Image is primarily a distribution company it appears (and this is entirely my assumptions since I have nothing to base this on) that its main valuable assets (in the absence of cash, which it obviously doesn't have enough of) are its distribution network and any contracts it may have to distribute media. Those assets are only of value to another distributor....and that universe of potential purchasers is fairly limited (unlike a house where the universe of potential buyers is pretty damn broad). Which means that those assets are going to be hard to sell off in amounts necessary for the note holders to recoup their investment.

So I think its in the note holders interest to work something out.

Yeah, they could find a buyer who might take the whole thing over and assume the debt...but that's probably unlikely. After all, who would have the wherewithal in this economy to start a media distribution company from scratch and assume someone else's debt....and if a going media distribution concern is interested, it's probably more valuable for them to see a competitor go under.

EDIT: And Image could file bankruptcy under Chapter 11 and continue operating for some time while it attempts to re-structure its debt.

Isn't their catalog worth 4 million? :-"
Probably not.

If anyone has an interest take a look at Image's September 30, 2009 SEC 10-Q filing. A 10-Q is a quarterly filing with the Securities and Exchage Commission which is intended to disclose info regarding a company's financial position. Of particular interest, aside from that pesky $15 million note, is that Image is "significantly past due" in its obligations to its exclusive disc manufacturer.

At page 10: "The substantial doubt about our ability to continue as a going concern has impacted our relationship with our trade and content suppliers and their willingness to continue to conduct business with us on terms consistent with historical practice. Our need for cash has intensified and we are currently unable to make all payments to all of our suppliers as they become due."

Tribe wrote:But inasmuch as Image is primarily a distribution company it appears (and this is entirely my assumptions since I have nothing to base this on) that its main valuable assets (in the absence of cash, which it obviously doesn't have enough of) are its distribution network and any contracts it may have to distribute media.

Other than the physical buildings it uses to do business in, office furniture, computers and other equipment, company automobiles, etc.

swo17 wrote: Other than the physical buildings it uses to do business in, office furniture, computers and other equipment, company automobiles, etc.

You in the market for a used laser printer?

Sorry for continuing to post items in this thread regarding the Image issue, but I suppose there are worse things I could be doing instead of browsing through corporate SEC filings on a rainy day.

Anyway, Image's last SEC 10-K filing (a 10-K is a yearly summary of a publicly traded company's performance) has some interesting information regarding Image's relationship with Criterion. To wit:

First:

" In the third quarter of fiscal 2008, [Image] signed a long-term exclusive home video distribution agreement with The Criterion Collection to distribute its special edition DVDs through July 2013. This agreement replaced the previous exclusive home video distribution agreement signed in August 2005."

Second:

"[Image] generate[s] significant amounts of net revenue for programming from one content supplier. If this content provider terminates our exclusive distribution agreement due to a default by [Image] or otherwise, our business would be adversely impacted. We depend on the exclusive distribution of programming from The Criterion Collection, which contributed approximately 19%, 32% and 32% of our net revenues from programming in fiscal 2009, 2008 and 2007, respectively. Should liquidity issues cause us to default on our payment obligations under our exclusive distribution agreement Criterion may terminate our distribution agreement, which would adversely impact our business, results of operations and financial condition. As of June 19, 2009 we are $850,000 past due in our obligations to Criterion. "

Third:

"Under [Image's] agreement with The Criterion Collection, [Image is] to prepay $1.5 million each month during the term for purchases of Criterion programming that may become due and payable to Criterion."

Fourth:

"Prior to January 2008, Image’s “core” business was generated primarily from The Criterion Collection, Discovery Channel programming, live stand-up comedy shows, music, TV, and other special interest video. In January 2008 we began to focus on the release of new, full-length cast-driven feature films, taking advantage of the dramatic contraction of the major studios’ specialty distribution divisions for independent and smaller-budgeted films. "

Fifth:

"In fiscal 2008, we entered into a new exclusive distribution agreement with The Criterion Collection, a Delaware corporation (Criterion), to exclusively distribute their DVD titles in North America. The new agreement replaced the then-existing exclusive distribution agreement dated August 1, 2005 and, among other things, extended our exclusive distribution relationship with Criterion through July 31, 2013.
The terms of the agreement call for a nonrecoupable distribution fee of approximately $3.4 million, covering the entire term of the agreement. Approximately $877,000 of the distribution fee had been previously paid and $2.5 million is being paid in 22 equal quarterly installments of approximately $112,000 beginning January 1, 2008, plus a single payment of approximately $37,000 in July 2013. We are expensing the $3.4 million distribution fee to cost of sales over the life of the related revenues generated by the agreement in accordance with the American Institute of Certified Public Accountants Statement of Position No. 00-2, “ Accounting by Producers or Distributors of Film. ”
Under our agreement with The Criterion Collection, we are to prepay $1.5 million each month during the term for purchases of Criterion programming that may become due and payable to Criterion. "

Maybe Comcast will buy Image.

oldsheperd wrote:Maybe Comcast will buy Image.

Studio Canal?

One issue that this raises is that if Image tanked, Criterion might have to eat any receivables it was anticipating from Image. Hopefully, that would not be a serious problem. If I am remembering correctly, Fantagraphics (comic book publisher) once had a problem like this and ended up in some relatively dire straits (but survived).

http://www.businesswire.com/portal/site ... ewsLang=en" onclick="window.open(this.href);return false;

Image defaults on their outstanding debt. No money. They haven't filed for Chapter Eleven bankruptcy yet. We'll see that by the end of January, IMO.

Criterion's going to have to find a new distributor.

ianungstad wrote:http://www.businesswire.com/portal/site ... ewsLang=en

Image defaults on their outstanding debt.

And at the bottom of this page there's an ad for a debt collection service ...

Now it gets interesting. Image will likely hold the threat of a bankruptcy filing over their creditors' heads to get some forebearance and breathing room to pay. So, I wouldn't say that a new distribution system is in the works quite yet.

Moral: Criterion should self-distribute.

Tribe wrote:Now it gets interesting. Image will likely hold the threat of a bankruptcy filing over their creditors' heads to get some forebearance and breathing room to pay. So, I wouldn't say that a new distribution system is in the works quite yet.

The problem is much more than just the loan payment they defaulted on. They can't pay their disc manufacturer, they are currently owing over a million dollars to Criterion, and have about $100 MILLION worht of debt. If they can't even get $4 million to pay their bills, they're not going to get $100 million.

Unlike other companies like, Marvel comics, who filed for bankruptcy protection once upon a time, Image has very few assets. Most of their media library is licensed. When the distribution agreements with the various parties expire, they can take their films or music elsewhere.

Ted Todorov wrote:Moral: Criterion should self-distribute.

They sort of did when Home Vision Entertainment was around.

ianungstad wrote: The problem is much more than just the loan payment they defaulted on. They can't pay their disc manufacturer, they are currently owing over a million dollars to Criterion, and have about $100 MILLION worht of debt. If they can't even get $4 million to pay their bills, they're not going to get $100 million.

That $100 million debt is what is carried on the books, it's not necessarily due and owing now. Regardless, the picture isn't pretty because that default on the note that you posted the link triggers additional defaults with other creditors. But a bankruptcy doesn't get creditors their money either.