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Former moneylenders sue American Idol owner over alleged dodgy dealing

By | Published on Thursday 15 December 2016

CORE

Following Simon Fuller’s legal wrangling earlier this year with the company that owns the ‘Idol’ franchise he created, now the firm’s former moneylenders have gone legal in a potentially explosive case.

As previously reported, Core Media was originally a venture led by entertainment industry veteran Robert FX Sillerman which bought stakes in the Elvis Presley and Muhammed Ali brands and acquired various media assets, principally Fuller’s 19 company and the ‘Idol’ talent show franchise it had successfully developed.

Sillerman ultimately departed the company and went on to set up his doomed dance music enterprise SFX, while Fuller also gave up his executive role at the business but continued to consult on the TV shows he had created, which included ‘So You Think You Can Dance’ as well as the various ‘Idol’ franchises.

Private equity company Apollo Global Management acquired the business in 2011, subsequently selling the stakes in the Presley and Ali brands to focus on Core’s media operations, and later forging an alliance between it and another media firm it owned, Endemol, and 21st Century Fox’s Shine Group, to create a reality TV powerhouse.

During that time the ‘Idol’ franchise started to wane, and its flagship show ‘American Idol’ aired for the final time earlier this year. Once the final ‘American Idol’ final had occurred, Core Media applied for chapter eleven bankruptcy protection. That led to the run in with Fuller, who hit out at Core Media’s plans to restructure its debts and sought to propose his own plan for taking the firm out of bankruptcy. For its part, Core successfully requested that the court cancel its ongoing consultancy agreements with Fuller.

In September, the bankruptcy court in New York then approved Core’s reorganisation plan, which saw the firm’s moneylenders receive significantly less than they were owed, in some cases pennies on the dollar. Now the ‘litigation trust’ set up for Core creditors by the bankruptcy court has filed a lawsuit accusing Apollo of dodgy dealing in relation to the Core/Endemol/Shine arrangement.

According to Courthouse News, the lawsuit claims that the terms of two loans worth $360 million that helped finance Apollo’s acquisition of Core in 2011 said that all owed monies must be repaid if control of the company changed, while if any merger took place, the merged entity must take on any outstanding liabilities to the money lenders.

The lawsuit states: “The lenders imposed these restrictions on Apollo to ensure that Apollo had ‘skin in the game’, and would not be able to effectively take value away from Core, or enjoy an exit event, in ways that would disrupt the lenders’ ability to be repaid by Core under the lending agreements”.

The lawsuit then basically alleges that the Endemol/Shine deal pretty much gave the newly created Endemol Shine Group control of Core and its assets – so, it was a change of control – but the firm’s creditors were not paid back what they were owed. The lenders claim that the Core/Endemol/Shine deal was specifically structured in order “to strip Core of its remaining cash, transfer Core’s corporate opportunities to its competitors, and ultimately leave Core to default on its obligations to its lenders”. Which it then did.

The lawsuit is seeking damages and punitive damages for intentional interference with contracts and inducing breach of the loan contracts. For its part, Apollo says that “the lawsuit is without merit and we intend to defend ourselves vigorously”. Good times. They should make a reality show out of all this, it would be much more fun than watching some warbling wannabes pretending they could become America’s next pop idol.



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