Image and Criterion

[Tribe]

Did Jennifer Aniston and Liam Neeson sink a distributor?

[Tribe]

Image thinks they are gonna resolve their lack of $$$ by offering tons of worthless stock for sale.

[domino harvey]

It's how Weird Al saved the day in UHF, so there's precedent

[Tribe]

It looks like a white knight has appeared on the scene:

Private Equity Firm to Invest in Image
By DEBORAH CROWE - 12/22/2009
Los Angeles Business Journal Staff

Image Entertainment Inc. said that a San Francisco private equity firm plans to invest up to $30 million in the struggling home entertainment distributor in a preferred stock deal that will require nearly all of the current board to resign.

The Chatsworth company said late Monday that its board of directors approved the sale of 22,000 shares of new Series B cumulative preferred stock and 196,702 shares of Series C junior participating preferred stock for a total $22 million to affiliates of JH Partners LLC.

The securities purchase agreement also grants the investors the right to purchase up to $8 million worth of additional series B and C stock in two later transactions. In addition, JH Partners will provide $5 million in credit support to persuade the company’s lenders to allow more borrowing under its current credit facility until a new one can be arranged.

JH Partners, which according to its Web site typically targets “growth-oriented businesses with sustainable competitive advantages” and revenues of $10 million to $300 million, is now investing a $390 million fund raised in 2008. It currently has $600 million under investment.

Image, which had been facing a possible Chapter 11 reorganization, has struggled for years to make the transition from VHS and DVD discs to downloadable and other digital media. Last week it defaulted on a $4 million debt payment for a $15.7 million senior convertible note.

“The company has struggled in recent periods because of a lack of resources,” Image President Jeff Framer said in a statement. “The company's new investors bring a wealth of entertainment industry experience coupled with access to sufficient capital to allow the company to continue growing."

The initial stock sale is expected to close by Jan.8. Image said it will use the net proceeds to repay outstanding indebtedness, other liabilities and for general working capital. As a condition for the investment, four directors approved by the new investors will be appointed to the board and all but one of the current directors will resign.

The company, which has seen its market cap dwindle to about $6 million, also received a Nasdaq delisting notice last week that it plans to appeal. Because the notice was triggered by the company’s low share price, it is unclear how the preferred share investment will influence the appeal.

Image shares were down 1 cent, or 3 percent, to 27 cents in midday trading on the Nasdaq.

[Jeff]

It looks like a white knight has appeared on the scene

Done deal.

[Tribe]

Still iffy:

Default loan payments, delisting by The Nasdaq Stock Market, and wary vendors and retailers contributed to Image Entertainment Feb. 11 reporting a third-quarter (ended Dec. 31, 2009) net loss of $2 million, compared to net income of $304,000 during the previous-year period.

The Chatsworth, Calif.-based distributor said revenue plunged nearly 36% to $25.1 million from $39 million last year, due to a weaker release slate, the ongoing economic recession and worries about Image’s ability to continue as a going concern, among other issues.

DVD revenue decreased 38.6% to $19,718,000, from $32,125,000 for the three months ended December 31, 2008. Blu-ray Disc revenue fell nearly 8% to $3.1 million from $3.4 million last year.

Best-selling DVD releases for the quarter included The Other Man, American Violet, Wings of Desire and Gomorrah.

The lone bright spot was digital distribution revenue increased 34% to $1.3 million from $976,000 during the same period last year.

Image, which five years ago turned down a $93 million acquisition offer from Lionsgate, started 2010 with its stock worth pennies.

On Jan. 8, it closed a $22 million preferred stock deal with JH Partners LLC, which subsequently assumed control of Image and named industry veteran Ted Green CEO, among other executive changes.

“Now that the transaction with JH Partners has closed, we are working to increase content acquisition activity and streamline processes that will help us in our goal to return to profitability,” said John Avagliano, newly hired COO and CFO.

EDIT: The financials are here.

[perkizitore]

They turned down 93$ million, only to go bankrupt???

[Tribe]

Sheer and utter speculation on my part.

I wonder...if the agreement between Image and Criterion allows Criterion to escape the exclusive distribution deal with Image if Image is acquired by another company. Then I wonder if that is so, did Criterion threaten to leave the distribution deal with Image if it was acquired by Lionsgate?

[perkizitore]

Why would i care if i were to pocket 93$ million?

[scotty2]

And had Lionsgate bought Image, would the StudioCanal titles have remained with Criterion?

[Tribe]

Why would i care if i were to pocket 93$ million?

If you look at some of the links I've posted previously in this thread you'd see that Image draws most of its revenue from the Criterion deal. $93 million may be good for a relatively short period of time...but after that, than what? Of course, all this is speculation.

[dx23]

From Blu-ray.com:

Image Acquires Handmade Library for Blu-ray

Posted March 17, 2010 08:44 AM by Juan Calonge


Image Entertainment Image Entertainment, Inc. announced today the licensing of the Handmade Films library, featuring over 30 titles including such classics as Time Bandits, The Long Good Friday, the Oscar-nominated Mona Lisa, A Private Function, Withnail and I and How To Get Ahead In Advertising. The announcement was made by Ted Green, Image Chairman and CEO. No Blu-ray release schedule for the library was given at this time.

"The Handmade Films library contains some of the greatest and most influential films of the past thirty years," remarked Green. "We look forward to making these classics available for the first time on Blu-ray and digital download for a new generation of fans."

"We're thrilled about our new partnership with Image Entertainment," said Antony Fraser, CEO Handmade plc. "Their legendary expertise with home entertainment is the perfect match for our picture collection."

Handmade Films was created in 1978 by ex-Beatle George Harrison and producer Denis O'Brien. The label's first theatrical release was Terry Gilliam's seminal 1981 fantasy Time Bandits. Throughout the 1980s, Handmade Films released an amazing string of commercial and critical hits including 1982's gritty gangster drama The Long Good Friday starring Oscar-nominee Bob Hoskins and Oscar-winner Helen Mirren; Oscar-winner Neil Jordan's lyrical, Oscar-nominated 1986 film noir Mona Lisa; the black comedies Withnail and I from 1987 and How To Get Ahead In Advertising released in 1989, both starring Richard Grant; as well as farces like A Private Function with Monty Python alum Michael Palin and Maggie Smith and Water with Oscar-winner Michael Caine and Valerie Perrine.

[manicsounds]

So right when they get in the black, and just barely, without releasing anything worthwhile in their own huge library, they go and aquire more titles that they will probably shelve for a while? What the hell...

[Bajaja]

Why do you think that they would shelve them? I bet that CC is already working on some of those acquired titles.

[Tribe]

I agree, I think those titles were acquired by Image specifically with Criterion in mind. It might be a way for Image to reduce its outstanding balance with Criterion if it offers the titles for a break in what it owes CC.

[dwk]

According to Criterion's website, both Time Bandits and The Long Good Friday have gone OOP. I don't know how to read the quiet way these went OOP. Does it mean they are gone for good or does it mean Image will let Criterion issue new special editions?

[kaujot]

I would assume that since they haven't announced it themselves, it means there's either going to be a new printing or entirely new editions.

[scotty2]

The Image web site lists the four Handmade blu-rays as (Image) editions instead of (Criterion) editions.

[Cinephrenic]

I wonder if this was some kind of deal to let these go for some of the Visconti films? Who knows...

[Jeff]

It is entirely possible that the deal that Image struck with Handmade Films provides for stripped down versions from Image and special editions from Criterion. That was the arrangement originally mentioned when Image (not Criterion) picked up the Jeremy Thomas/Recorded Picture library, yet so far only the Criterion versions of those have been released. Image also currently offers their own stripped down versions of 8 1/2 and I Vitteloni. The fact that Criterion took these out of print without saying anything indicates that they are either planning to eventually replace them with new versions or that they don't want to ruffle the feathers of their distributor by announcing the OOP status and send people rushing to buy them over the new Image releases. Image may have wanted a period of exclusivity with these, but they'd be crazy not to let Criterion do them eventually. The majority of Image's profit is generated by their distribution arrangement with Criterion.

[ianungstad]

I agree that it's almost a certainty that Criterion will reissue all these discs in upgraded form in the future. They made big splashes on their website twice now for the Studio Canal stuff, annoucing that they are gone for good.

If we don't see a similar announcement on the website for the Handmade stuff and Criterion refuses to comment on the issue in the next few days, I'm sure the scenario described by Jeff is the reason why,

It is certainly in Image's best interest to have multiple revenue streams from a product and to maximize profits. Don't see why they wouldn't be game.

[HistoryProf]

Shouldn't Mona Lisa be OOP with these two? it's still showing as available on the Criterion site.

[dwk]

Both The Long Good Friday and Time Bandits are no longer showing up as OOP on Criterion's site.

[CrazedCollector]

Now I'm glad I didn't snap up these two outdated spines in the meantime

Still hope for Criterion Blu SE releases?

[flyonthewall2983]

I'd be on the new Long Good Friday disc in a heartbeat.