MONTREAL: Blackwatch Communications has filed a ‘notice of intention’ to creditors to reorganize its debt and has hired accounting firm Richter, Usher & Vineberg to handle negotiations and reorganize the company.

‘We are working with the creditors right now. It appears we have the support of the investors and the secured creditor,’ says Blackwatch founder and CEO Bill Mariani. He says Blackwatch owes its single-secured creditor $1 million, and a considerably higher amount to its unsecured creditors.

Mariani says the refinancing proposal will be tabled within 60 days.

‘Half of the creditors, which represent investors in the company more than anything else, have already agreed to convert into a form of equity. So that means the debt will be gone and that is the goal,’ he says.

The debt owed to trade suppliers (industry) is a separate matter, he adds.

Mariani says Blackwatch has $8 million in current receivables in the form of guaranteed sales contracts. The library includes more than 100 films including 11 films produced by Blackwatch, including Dead Innocent, Dead Silent and last year’s Life in the Balance starring Bo Derek. ‘There is a definite revenue stream for these films,’ says Mariani.

Mariani says he’s also met with third-party investors who could enter the picture as asset-based lenders (a loan against current sales contracts) for up to $2 million.

‘We just didn’t have the capital base to keep pouring money into production and distribution, which was the ‘capital’ eater of capital,’ he says. ‘You’re putting your money [into distribution] now and you see that money in two or three years. Crouching Tiger is an anomaly where you make your money in the first year.’ Mariani says the company will be reconfigured, focusing solely on distribution.

Blackwatch is no longer directly involved in production or film financing.

The company remains the sub-distributor for Sony Pictures Classics product in Canada. ‘Let’s put it this way – we’ve come to an arrangement with [Sony],’ says Mariani. ‘We don’t have a term contract, it’s more like a package deal. So we’ll fulfill our obligations and whether we go forward beyond that is a different story.’

Staff has been reduced from 30 last fall to approximately 10, with more cuts likely ahead.

Senior executives who have left the company include Yves Dion, president of two-year-old Blackwatch Releasing, Gilles Labranche, president of Blackwatch Financial and Kim Berlin, president of the production division.

Andy Myers, senior VP in the Toronto office, remains at his post.

Last September, Blackwatch announced plans to launch what would eventually have become a $50 million financing fund for Canadian film and TV producers. The fund’s launch was contingent on a reverse takeover and a listing on the CDNX exchange, and from a private placement. The funds were to be used to establish a major credit facility with a Canadian bank, but by December, or even before, the plan in its announced form had collapsed, and the company’s creditors became increasingly impatient.

Blackwatch didn’t exactly get rich distributing Ang Lee’s smash martial arts hit Crouching Tiger, Hidden Dragon. The distrib’s share of the record $16-million Canadian box-office take looks something like this: 40% minus taxes, about $2 million, minus the sizable cost of the P&A investment. Up to 75% of the balance was remitted directly to the film’s rights holder, Sony Pictures Classics.

Blackwatch no longer holds the Canadian franchise for product from The Shooting Gallery or Trimark Pictures.