Core Entertainment Inc., the company behind the “American Idol” TV series, won approval from a bankruptcy judge on Friday to tap its lenders’ cash and move forward with its chapter 11 proceedings.
Judge Stuart Bernstein of the U.S. Bankruptcy Court in New York approved Core’s so-called first-day requests, including paying its employees and its taxes.
Core, as well as Los Angeles-based 19 Entertainment Ltd., and related companies that own and produce content for the global “American Idol” franchise, and “So You Think You Can Dance,” and “Prison Wives,” sought chapter 11 protection Wednesday night and Thursday morning in New York.
The company has yet to secure a bankruptcy loan, but it is still negotiating with its lenders, Core’s lawyers said in court on Friday.
“We do expect to sign a restructuring support agreement with those lenders within the next week,” said Core lawyer Matthew Allen Feldman. “We’re actively drafting a plan.”
Core owes about $ 398 million to first- and second-lien lenders, court papers show. The company has been in negotiations with these lenders, including Crestview Media Investors LP. Crestview owns a major stake in the company’s debt.
Core’s debt load stems from when funds affiliated with Apollo Global Management APO -2.87 % and 21st Century Fox Inc. FOX -1.47 % took the company private in 2011, the company’s lawyers said in court Friday. Apollo and 21st Century Fox each own a 50% stake in the company. (21st Century Fox was part of the same company as The Wall Street Journal until mid-2013).
The company also expects to line up bankruptcy financing from its subsidiary, G.O.A.T. Blue Moon Holdings LLC, Mr. Feldman said. While the amount wasn’t disclosed, a deal is expected by next week, he added.
Much of Core Entertainment’s financial struggles are related to the declining viewership of “American Idol,” Mr. Feldman said.
Lack of viewership led Fox to cancel the show, with 2016 being the final season for “American Idol.” The final episode of the show aired April 7, and Core had already been in discussions for months with its lenders. In the first half of last year, Core suffered a loss of $ 35.6 million in revenue from “Idol” as well as other TV shows owned by the company.
Declining revenue and a brewing battle with Simon Fuller, the creator of the “Idol” franchise and “So You Think You Can Dance,” pushed Core into bankruptcy protection, Mr. Feldman said Friday. In 2010, Mr. Fuller left his position with Core to become a consultant.
The company believes Mr. Fuller is owed $ 2.9 million, but Mr. Fuller says he is due more. He has taken steps that could lead to an involuntary winding-up proceeding in the U.K., Mr. Feldman said Friday.
Mr. Fuller is considering partnering with another firm to make a bid for the company, with the vision of reshaping it for the social media age, a person familiar with the matter said Thursday.
A Core spokeswoman said Core had no plans to sell any assets in the bankruptcy process.
Core generates its revenue from a share of the rights to the “American Idol” brand, and other TV shows and sources, including long-term recording agreements with former “Idol” contestants, like Kelly Clarkson and Carrie Underwood, court papers show.
—Peg Brickley contributed to this article.
Write to Lillian Rizzo at [email protected]