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Digital Domain Seeks Bankruptcy, Faces Auction

James Cameron’s special effects house is coming apart

Digital Domain has filed for Chapter 11 bankruptcy protection Tuesday, temporarily holding off creditors who have threatened to take over the company based on past debts and losses that are measured in the tens of millions of dollars.

The special effects house, founded by “Avatar” director James Cameron in 1993, closed its Florida location over the weekend putting 300 people out of work, and now will sell off the remaining pieces of the company. That includes a proposed $15 million sale to Searchlight Capital Partners, which is interested in Digital Domain Productions — one of the few financially viable arms of the company.

“We’re excited to begin this new chapter in our history and look forward to partnering with Searchlight,” said Ed Ulbrich, who just took over as chief executive officer of the company following the abrupt resignation of John Textor over what he said was a protest of the Florida location closing. “The capital commitment of Searchlight will enable us to continue to bring our expertise to feature films, advertising, games and other media experiences, with a focus on what we do best — creating amazing digital productions. We remain on track to deliver all of our clients’ productions on schedule, on budget and at the highest degree of quality that they expect from Digital Domain.”

One of those projects is “Ender’s Game,” the new film from Gavin Hood starring Asa Butterfield, Harrison Ford, Abigail Breslin and Ben Kingsley.

Searchlight Capital is a new company founded just two years ago, according to the company’s website. The effort appears to be led by Eric L. Zinterhofer, the co-head of the company’s media and telecommunications investment platform. Reviewing the history of the principals of Searchlight Capital, it seems none of them have any prior media experience, and will likely leave day-to-day operations to someone with more experience in running a special effects house.

Zinterhofer is the husband of Aerin Lauder, the heiress to the Estee Lauder Cos. cosmetics fortune.

Searchlight raised $860 million in its first fund last April and acquired footwear designer Hunter Boot out of Edinburgh, Scotland.

But the huge losses and the fire sale may not be the only thing plaguing what remains of Digital Domain. Officials are now looking into how Digital Domain ended up with tens of millions of dollars in state money in Florida.

Enterprise Florida, the group that typically approves such taxpayer-funded incentives in the state, told the Palm Beach Post that it not only was sidestepped by lawmakers keen on bringing Digital Domain to Florida — it was actually against giving the company money in the first place.

One of the lawmakers who helped sidestep Enterprise Florida, then Republican state legislator Kevin Ambler of Tampa, eventually earned a seat on the Digital Domain board of directors. Ambler was a strong proponent of bringing more filmmaking to Florida, which has been left in the dust by other states using massive incentives to lure television and film projects there.

Even some local officials in nearby counties that Digital Domain courted were skeptical of the company’s finances, and when they asked to see the ledgers, at least one local official said Digital Domain left and started to negotiate with neighboring counties and cities.

In the end, it was West Palm Beach, which offered the company $10 million in cash, $9.8 million in land, and a $15 million bond to fund a school. While it did receive the land and the bond, the Post reports that Digital Domain received only $2 million of the cash promised.

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Could they be a Rut-ro! Shaggy
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