Tags: Aramid | bankruptcy | movie | lawsuits

Aramid Entertainment Fund Files for Bankruptcy Over Lawsuits

Monday, 16 Jun 2014 01:50 PM

Aramid Entertainment Fund Ltd., a hedge fund specializing in financing movies, sought bankruptcy court protection from creditors to deal with the costs of suing borrowers who failed to repay loans.

Aramid listed assets of $100 million to $500 million and debt of $10 million to $50 million in Chapter 11 documents filed June 13 in U.S. Bankruptcy Court in Manhattan. The fund is based in the Cayman Islands.

Aramid “has been embroiled in substantial and time-consuming litigation relating to some of its investments,” Geoffrey Varga, a consultant helping to liquidate the Aramid fund, said in court filings. “The prosecution and defense of these actions has consumed a substantial portion of AEF’s liquidity and exposes it to potential liability.”

Aramid offers financing to film and television producers and distributors “secured against a variety of assets,” according to its website. Those assets include films and equipment.

The fund’s owners include Future Capital Partners Ltd., a London-based investment company, and Screen Capital International, a Beverly Hills, California-based company specializing in cross-border movie financing that provide tax advantages, according to court filings.

Litigation Expenses

The Aramid fund began experiencing financial problems after being forced to sue movie producers who defaulted on loans or violated film-financing agreements, Varga said in court filings.

Varga is an official of Kinetic Partners, a consulting firm hired by Aramid to help liquidate some of its funds. The company is being represented by lawyers from Reed Smith LLP in the bankruptcy.

Aramid sued Fortress Investment Group LLC and Relativity Media LLC in February 2012 over $44 million in losses from a film financing agreement with Sony Corp.’s movie studio.

The fund accused Fortress executives of using confidential information obtained from Aramid to make a deal with Sony that destroyed Aramid’s investments. The suit was filed in state court in Los Angeles

Aramid contended that it invested $22 million in Class B notes in a so-called film-slate financing deal negotiated between Relativity Media, an independent movie financier and producer, and Sony Pictures in 2008.

Portfolio Review

The agreement was designed to fund as many as 45 movies over five years and included a $525 million commitment from Citigroup Inc., according to court filings.

Fortress, a New York-based private-equity firm, reviewed Aramid’s portfolio in 2010 as part of a potential buyout, according to court filings. Fortress didn’t make an offer for any of Aramid’s assets and used information about the Sony investments to buy the outstanding balance of Citigroup’s stake, $226.7 million, for 50 cents on the dollar, according to the suit. A trial in the case is set for August, according to the Aramid fund’s bankruptcy filing.

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Aramid Entertainment Fund Ltd., a hedge fund specializing in financing movies, sought bankruptcy court protection from creditors to deal with the costs of suing borrowers who failed to repay loans.
Aramid, bankruptcy, movie, lawsuits
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2014-50-16
Monday, 16 Jun 2014 01:50 PM
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