Rhythm & Hues to file for bankruptcy protection

The award-winning visual-effects company Rhythm & Hues, considered one of the industry’s leaders, is laying off 200 employees as it files for bankruptcy protection, sources close to the studio said.

The layoffs come as the L.A. company, which worked on Ang Lee’s “Life of Pi,� nominated for a visual-effects Oscar, is preparing to seek bankruptcy protection from creditors later Monday in the wake of mounting financial difficulties, the studio said.

The studio told some employees not to report to work Monday and said the studio was have difficulty meeting its payroll obligations, said sources, who asked not to be identified because they were not authorized to discuss the matter.

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The layoffs and planned bankruptcy filing are the latest signs of distress among California-based visual-effects companies that have had an increasingly difficult time competing with companies in Canada, the UK and India that benefit from tax credits or cheaper labor to produce visual effects at a lower cost.

More than a half-dozen California visual-effects houses have shut down or filed for bankruptcy in recent years because of growing global competition. The parent company of Venice-based Digital Domain, co-founded by director James Cameron, last year filed for bankruptcy protection.

Digital Domain was subsequently acquired by Chinese film and TV company Galloping Horse and Reliance MediaWorks, the post-production company that is part of the Indian conglomerate Reliance ADA.

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In a meeting with employees Monday, Rhythm & Hues executives singled out the difficulty of competing with tax subsidies offered in the UK and Canada, and indicated about 200 people would lose their jobs.

Rhythm & Hues had been negotiating with India-based Prime Focus to provide $20 million in financing for the studio, but that deal fell through, sources said. Major Hollywood studios are expected to provide a loan to the studio as part of its restructuring.

Founded in 1987, Rhythm & Hues has created effects for such movies as “The Golden Compass,� “Babe,� “Django Unchained,� “Snow White and the Huntsman� and “Life of Pi,� for which it won an award from the British Academy of Film and Television Arts (BAFTA). It’s also known for its work on commercials

The studio employs 1,400 people and has studios in Canada, India, Malaysia and Taiwan.

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