Founded in 1915 by producer William Fox, Deluxe Entertainment Services Group Inc has filed for bankruptcy this October. It’s another sign of the drastic changes in the movie industry.
Deluxe Entertainment Services Group (Deluxe) is presented as the world’s leading video creation to distribution company offering global, end-to-end services and technology. The company creates, transforms, localizes, and distributes content, and, also according to Deluxe, the world’s leading content creators, broadcasters, OTTs and distributors rely on its experience and expertise. Deluxe began as a film processing laboratory, and evolved with the times, entering into new technological marketplaces, and accommodating digital technologies.
The decline of motion picture production on the east coast led to the closure of the New York, Chicago and Toronto plants. In May 2014, the Los Angeles plant closed, due to the motion picture industry’s conversion from film to digital production. August this year, Company 3, a subsidiary of Deluxe, announced the acquisition of Sixteen19, a world-class creative editorial, production and post services company based at 44 West 18th Street, New York. The information distributed then suggested that ”the combination of these industry trailblazers will unite two talented teams of artists and technicians, as well as fortify Company 3’s position as a leader in New York’s booming post-production market for feature film and episodic TV.”
No impact on employees, customers and vendors
That same month, though, according to a Reuters report, Moody’s Investors Service said that Deluxe had been struggling with negative cash flows because fewer movies were entering wide release, some movies were being shelved and DVD and Blu-ray sales and prices were falling. Variety’s article published yesterday notes that “Deluxe Entertainment, the debt-burdened post-production services company, filed a prepackaged bankruptcy on Thursday, as it seeks to hand over the company to its debt holders.”
Deluxe commenced the formal process of soliciting votes from lenders in support of the comprehensive financial restructuring and filed pre-packaged cases under Chapter 11, outlining a proposed plan of reorganization (the “Plan”) that details the terms of the financial restructuring, including the debt-for-equity exchange. This financial restructuring process, once completed, will reduce the Company’s long-term debt by well more than half and raise $115 million of new financing. As the Company finalizes the process in the coming weeks, Deluxe’s day-to-day operations will continue without interruption and with no impact on employees, customers and vendors.
Less debt, new financing
“We have been working to put Deluxe in a strong financial position, and these steps are the best and most efficient way to finalize and implement the comprehensive financial restructuring,” said John Wallace, Chief Executive Officer of Deluxe. “This process will allow us to strengthen our balance sheet and gain the financial flexibility and resources to drive investment in key growth strategies with no disruption to our business and no impact to our employees, customers, vendors and other business partners.”
Deluxe has requested that the Court schedule a confirmation hearing to approve the Plan on October 24, 2019 and expects to implement the transaction shortly thereafter. Once completed, the Company expects to emerge from the refinancing process with significantly less debt and additional new financing to support its operations and investments.