For months, industry insiders have been growing increasingly concerned about what appeared to be a cash-flow issue at independent studio Sonar Entertainment.

Multiple sources report that Sonar has been late on payments for writers on scripts and to talent agencies for packaging fees. The slowdown in the payment schedule has raised questions about Sonar’s ability to continue funding shows. The company has also seen a number of executive departures in recent months. A new CEO was appointed in August.

According to a source familiar with the situation, Sonar has been juggling payments to writers and agencies after its parent company, Canadian private equity firm Catalyst Capital Group tightened the purse strings in advance of the management shakeup implemented last month. With 10 shows in production, sources said Sonar took the step of delaying some writer and packaging fee payments in order to manage its cash-flow needs. 

But slowing down the payment schedule to writers and talent agencies — two of Hollywood’s most talkative constituencies —  is virtually guaranteed to spark rumors in the creative community about a company’s solvency, as Sonar has faced. Industry sources observed that Sonar likely got overextended with production commitments at a time when there is no shortage of demand for TV content.

David Ellender, who was promoted to Sonar CEO in August, would not comment on specific financial matters but denied that there were larger issues threatening Sonar’s ability to move forward on new projects. 

“We are very comfortable with our financial position,” Ellender told Variety. “We’re able to finance productions and we’re well-capitalized not just through Catalyst but also through our other financial facilities that we’ve set up…We’re looking forward to producing or executive producing projects going forward.”

When pressed about complaints that script payments have been late, Ellender reiterated that Sonar is “well-capitalized” and added: “We will make our payments.”

A source close to the situation said the industry rumors sparked by the late writer payments were an embarrassment to the company. Sonar has financing to draw on over the long term but the capital crunch came as Sonar leaders were in the midst of a “strategic realignment” conversation with Catalyst. It’s also understood that Sonar has been shopping itself to larger production entities for a sale.

Sonar is the production outfit behind “Mr. Mercedes,” the Audience Network drama series that bowed its third season on Tuesday. The show is expected to get a fourth season renewal from Audience. Ellender said the company is sorting out creative issues on the show — adapted by David E. Kelley from the Stephen King novel series — but that financing for a potential fourth season was not an issue. Sources said payments have been timely to creatives working on “Mr. Mercedes” given the importance of the show to Sonar and the stature of Kelley and others. 

Jordan Peele’s Monkeypaw Prods. set a first-look deal with Sonar in February 2017 but by June 2018 had moved to Amazon Studios. Monkeypaw is producer of “The Hunt” and “Lorena.” “The Hunt” is a scripted drama that follows a group of Nazi hunters in 1970s New York that counts Al Pacino among its cast. The series is currently in production and no premiere date has been publicly announced. “Lorena,” which bowed in February, is a four-part docuseries that took a deep dive into the case of Lorena Bobbitt, who made international headlines when she cut off her husband’s penis while he slept in 1993.

A source at another production banner that had a first-look deal with Sonar said that one reason they left is the fact that the company seemed to be dealing with significant financial constraints. The source noted that it was no secret that Sonar has been “desperately” looking for a buyer.

Ellender emphasized that some activities at Sonar have been in flux because of the management transition. He’s been with Sonar since 2016 and was formerly president of global distribution and co-productions. Ellender succeeded Tom Lesinski, the former Paramount and Legendary Pictures alum who headed Sonar for a little more than three years.

BBC alum Matt Loze joined Sonar in July as head of development. Jenna Santoianni, Sonar’s executive vice president of television series, left in March to become head of development at Paramount Television. Cory Lanier, Sonar’s vice president of television series and digital, has left the company for an executive role at the Russian production company Sreda. Ellender confirmed Lanier’s exit, saying “In these times of change, Cory left the company. He’s been great to Sonar but we wish him every success as he grows and moves on.”

Other shows produced by Sonar to date are AMC’s adaptation of the novel “The Son,” and the MTV/Spike series “The Shannara Chronicles” among others. “Taboo” debuted to solid reviews in 2017 and was subsequently renewed, but there has been no word since about when the next season will air. “The Son” aired two poorly-reviewed seasons on Saturday nights on AMC, while “Shannara” aired one season on MTV before being shuttled to Spike TV (now Paramount Network) for season two before being canceled.

Sonar was also set to produce a series adaptation of the “Mysterious Benedict Society” YA books by Trenton Lee Stewart for Hulu. Staffing for the show’s writers’ room began in March and continued into May, but sources say that they received word in August that Sonar was no longer going to spearhead production, with Disney’s 20th Century Fox TV currently in negotiations to serve as the studio on the show. Sonar will remain an executive producer on the series.

Sonar was launched in 2012 on the back of Robert Halmi’s RHI Entertainment, after RHI went through a bankruptcy proceeding and his son Robert Halmi Jr. was pushed out as CEO. Sonar was bankrolled in part by TPG, the parent company of CAA, with help from the CAA-affiliated Evolution Media Capital. But TPG, CAA and Evolution are no longer closely involved with the company.

Sonar was designed to generate a healthy cash flow to support production financing from the Halmi library of about 3,000 hours of programming. Robert Halmi Sr. was known for his splashy globe-trotting miniseries and TV movie productions, done on a budget but with a particular Halmi gloss.

Ellender disputed speculation that the Halmi library content has failed to generate as much revenue as Sonar initially projected. He said investors have been happy with the returns they have seen from the library and that it sells well both in the U.S. market on cable and streaming platforms, as well as internationally.

“We think that is going to continue, particularly with the growth of AVOD here,” he said. “We’re seeing an uptick in terms of where the library sits.”

Cynthia Littleton contributed to this report.

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