UPDATED EXCLUSIVE with Megan Ellison memo to staff: A showdown that has lenders on one side of the table, with Annapurna’s Megan Ellison and her father and Oracle co-founder Larry Ellison on the other, is about to take place, and it will decide whether Annapurna continues as a taste-making studio or a Chapter 11 casualty.



According to multiple sources, Annapurna has burned through much of the $350 million credit facility the company secured in fall 2017. Those sources said Annapurna has either defaulted or is about to default on that debt. A deadline has been set by lenders for this week to come to a solution.

The syndicate of senior lenders is considering putting Annapurna into bankruptcy, sources said. That is the usual course of action when entities like The Weinstein Company or Relativity lost the confidence of banks and don’t have the receivables to pay back them back.

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But this case isn’t ordinary because it is Larry Ellison, which is why the banks have kept this situation quiet. Deadline hears that the banks expected him to step in and clean up the mess. “This is like a rounding error for him,” said a source. The talks haven’t gone the way the banks expected though, because Ellison is driving extremely hard terms, based on the relationship he has with several of the lenders.

And so extensive preparations have been put into place for Annapurna to file for Chapter 11 in either Delaware or California if the elder Ellison doesn’t provide a Hail Mary for his daughter and her besieged company. This could mean all the drama amounts to a hiccup for Annapurna, or something far more serious.

A spokeswoman for Annapurna issued the following statement: “The Ellison family is in negotiations to restructure their deals with the banks. They remain in full support of the company and are dedicated to Annapurna’s future.”

Megan Ellison also sent a memo to staff today addressing the situation.

“Restructuring deals with financial institutions is not uncommon, yet the process is usually handled without a spotlight on it,” she wrote (read the memo in full below). “Fortunately/ unfortunately, people like to write about me and my family. That said, it is of tremendous importance to me that you all know we are as committed as ever to this company and are in full support of our future.”

Ellison, reportedly the fourth-richest person in America and the No. 7 richest individual person in the world with a fortune estimated at $70 billion, has his own revolving credit facility with two of the key banks that are part of the Annapurna credit facility. That is certainly reason for those banks to not be as aggressive as they would normally be, for fear of alienating him.

Larry Ellison has a $1 billion line with JP Morgan and another with Wells Fargo, two of the banks with significant hold positions in the senior facility on Annapurna. Known as a hard-nosed businessman, Larry Ellison has been negotiating to buy her debt at approximately 80 cents on the dollar, which may be drawndown on his own credit line with those two banks, sources said. It is not a great prospect for those banks, to take a haircut on what they are owed, and then finance the result. But a bankruptcy alternative might only yield them 50 cents or 60 cents on the dollar.

Bankruptcy would be an embarrassment for Megan Ellison, and several sources familiar with the issues felt her father wouldn’t allow that. Annapurna secured in fall 2017 a $350 million senior credit facility, with J.P. Morgan serving as administrative agent and co-lead arranger with Comerica Bank. Banks in the funding lineup when it was announced were City National Bank, First Republic Bank, HSBC, MUFG Union Bank, SunTrust Bank and Wells Fargo.

Finance sources said the bankers feel betrayed: while Larry Ellison’s family office was portrayed as being very involved in the marketing documents sent to the banks and indicated the office was behind his daughter’s venture, there was no commitment from Larry Ellison in the final documents. That gives the Oracle co-founder a measure of leverage, beyond him being a big customer for major lenders now and in the future. Putting in bankruptcy the company founded by the daughter of one of the wealthiest men on the planet would involve the banks’ CEOs and Risk Committee approval, something most bankers involved think might be political suicide for them.

How did things go so awry for Annapurna?

After establishing herself as a taste-making producer-financier of films like Zero Dark Thirty, American Hustle and The Master, Annapurna expanded into a full-fledged studio. It has a marketing and distribution operation that is costly, but whose costs are now shared through a joint venture with MGM, and this includes domestic distribution and marketing of the James Bond 25 film. Annapurna set a streaming deal with Hulu and has Sue Naegle building out a television division, with a theater division and another division for interactive IP also part of the company. When tastemaking producer Plan B’s deal expired at Paramount, Annapurna became home to the company behind Annapurna’s Vice and If Beale Street Could Talk and such Oscar-winning films as as Moonlight, The Big Short and 12 Years a Slave.

But not enough has gone right, since the company came out of the gate in summer 2017 with Detroit. The drama, directed by Oscar-winning Zero Dark Thirty helmer Kathryn Bigelow, depicted the blatant police brutality that occurred at the Algiers motel during the riots of 1967. The film opened early August, usually the domain of popcorn films, but corresponding to the 50th anniversary of the event. The pic cost $34 million and grossed only $16 million domestic and $24 million worldwide. Other films have been critical darlings but cost too much, and there wasn’t a breakout commercial hit.

“Vice” Annapurna Pictures

That included the Adam McKay-directed Vice and the Barry Jenkins-directed If Beale Street Could Talk, which got 11 Oscar nominations between them. But Vice had a reported budget of $60 million and a worldwide gross of $78 million. Beale Street grossed only $15 million domestic and another $5 million worldwide, on a reported budget of $12 million. The Nicole Kidman-starrer Destroyer grossed $1.5 million domestic and another $4 million worldwide on a reported $9 million budget.

The company had a bright spot in Olivia Wilde’s directorial debut Booksmart, but for all its critical acclaim even that film had limited upside, a $24 million worldwide gross so far on a $6 million budget. Annapurna on August 16 releases the Richard Linklater-directed Where’d You Go Bernadette, starring Cate Blanchett.

The company’s expansion has seen Annapurna run through several hundred millions of dollars. A course correction occurred a year ago, when Chelsea Barnard exited as president of film and the company jettisoned two films: the Jennifer Lopez-starrer Hustlers (which was picked up by STX and accepted into the upcoming Toronto Film Festival) and a film about Fox News founder Roger Ailes, which Jay Roach directed, that BRON Studios picked up. This came about after Annapurna president Marc Weinstock left shortly before this drama, and wasn’t replaced.

“Booksmart” Annapurna Pictures/United Artists Releasing

It was speculated that Larry Ellison and his team stepped in and prompted those changes, out of concern his daughter wasn’t hands-on enough in the management of a company that has always relied on his money.

Larry Ellison is an investor in son David Ellison’s Skydance venture, but his focus has been on commercial tentpole fare that has included co-financing the Mission: Impossible films, as well as the upcoming Top Gun sequel with Tom Cruise.

While that company drew quizzical glances when it set former Pixar founder John Lassiter to run its animation division, the road has been a smoother one than Annapurna experienced, shooting at the elusive moving narrow target of director-driven tastemaker fare. Besides Top Gun: Maverick, Skydance is a partner in the Ang Lee-directed Will Smith-starrer Gemini Man and Terminator: Dark Fate. The latter, directed by original Deadpool helmer Tim Miller, brings back for the first time creator James Cameron, who hasn’t been involved with a Terminator film beyond the first two classics that he directed. Skydance was part of a previous panned Terminator: Genisys installment, but even that $155 million film grossed $440 million worldwide. Not every film has worked — Life and Geostorm didn’t — but much has worked and the television division has been particularly strong.

Ironically, it was Megan Ellison who had the foresight to acquire the Terminator rights out of the Carolco library when that company went bankrupt, for around $20 million. It didn’t fit the kind of movies she wanted to make, and she sold those rights to her brother, David. It looks like the finale might be a winner for Paramount and Skydance.

Meanwhile, Annapurna’s fate will be decided shortly by the banks and the Ellisons. Some who know her suspect that when Megan Ellison is no longer exclusive to United Artists Releasing (the joint venture between Annapurna and MGM) beginning early next year, she might well go back to her previous practice of funding and producing taste-maker fare, and placing each film at whatever studio feels best for the pictures.

Here’s Megan Ellison’s memo dispersed to the trades after Deadline broke its story:

Dear AP Team,

I got word this morning that there are some rumblings around town about our current status with the banks and that a story is likely to hit the press at some point today.

Restructuring deals with financial institutions is not uncommon, yet the process is usually handled without a spotlight on it. Fortunately/unfortunately, people like to write about me and my family.

That said, it is of tremendous importance to me that you all know we are as committed as ever to this company and are in full support of our future.

Regardless of whatever comes out in the press, the truth is that we are well on our continued path towards success. There will always be speculation, misinformation and personal jabs in the press – that’s part of the business.

But know, none of that matters to me. What does is your sense of security and protecting the special community and culture at Annapurna. I believe in what we make and have no intention of stopping any time soon.

We have a lot of exciting things on the horizon and I have no doubt all of our hard work will continue to show Annapurna’s unique and powerful place in this industry.

If you have any questions or want to talk, please do not hesitate to reach out.

Megan