The Yari Film Group's distribution division has been forced into involuntary bankruptcy, the company's CEO Bob Yari announced, according The Hollywood Reporter.
Four creditors took action against the company, forcing the Los Angeles division of United States Bankruptcy Court to order Yari's releasing arm into Chapter 11, forcing it to reorganize. The company is disputing the debts.
Yari blamed the tightening credit markets and the earlier bankruptcy of payroll company Axium, which according to Yari swept millions of dollars from its payroll accounts, as a "perfect storm" that sunk the company financially.
Yari said the company was left with no other option but to commence substantial layoffs and to suspend its releasing activities. There was no immediate indication of how deep the layoffs would be.
While the distribution of films such as What Doesn't Kill You and Rod Lurie's Nothing But the Truth are moving forward (both are making awards qualifying runs this month), the immediate impact on these and other films are unclear. The company has distributed such recent films as The Illusionist and Resurrecting the Champ.
He also said the company's production arm will not be affected, though it is likely to make fewer movies.
"Our goal is to aggressively work towards reorganizing our debt so that we can become a stronger company," Yari said in a statement. "In the meantime, our production arms are distinct entities with separate financing which remain unaffected by the legal proceedings. We will go on functioning, making new films, covering our payroll and paying for employee benefits."