Weintraub Firm Seeks Bankruptcy Protection

Weintraub Entertainment Group and three of its units on Friday filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code after the company’s banks insisted that $84.8 million in loans be paid.

The studio will try to reorganize and keep operating, President Kenneth Kleinberg said. The filing doesn’t affect the personal assets of Jerry Weintraub, the company’s chairman and chief shareholder.

Some of the company’s bondholders, who are owed $91 million, had threatened to file an involuntary bankruptcy petition after the Bank of America and Credit Lyonnais Bank Nederland demanded payment of their loans, which are secured by Weintraub’s 2,000-title film library. The bondholders feared that they would get little if the banks retired their own debt by selling the library.

Kleinberg said restructuring efforts were hampered by a weakened economy. “Like many other assets, including Southern California real estate, the library, if sold today, is not expected to realize its true value,” Kleinberg said. Weintraub Entertainment bought the library from Cannon Group Inc. two years ago for more than $80 million.

The federal government is the largest unsecured creditor, with $22.5 million in Weintraub junk bonds that were bought by failed thrifts. Those bonds are now held by the Resolution Trust Corp., the federal agency in charge of mopping up the savings and loan mess.

The bankruptcy petition listed $15 million in bonds owned by the RTC that had been owned by CenTrust Savings in Miami, a now-defunct thrift that was sold to Great Western Financial. Another $7.5 million was owned by Imperial Federal Savings in San Diego, now operated by government regulators.

Also, $13 million in bonds is owned by two troubled thrifts--Columbia Savings in Beverly Hills and Far West Savings in Newport Beach--that the government could eventually own if they are ultimately seized by regulators.

The Weintraub bond offering was underwritten by Bear, Stearns & Co. But the list of bondholders also includes many former customers of Drexel Burnham Lambert junk bond chief Michael Milken, a Weintraub friend. The thrifts were all major Milken customers. A unit of Zenith National Insurance, headed by Milken’s second cousin, Stanley Zax, owns $3 million in Weintraub bonds.

The petitions also listed debts to Hollywood writers and producers who have worked on films that Weintraub still hopes to produce. Among those debts are $280,000 to writer Sam Hamm for a script called “The Avengers” and $100,000 to writer Joe Eszterhas for “Jade.”

Weintraub Entertainment, launched with more than $400 million in funding in 1987, got into trouble after half a dozen of its films flopped.