Ryan Kavanaugh Relativity Bankruptcy
Michael Buckner/Getty Images

Relativity Media filed a plan that it says will allow it to emerge from bankruptcy in late January and to release a slate of seven films while moving forward with 25 other movie projects that are in “active development,” according to a press release announcing the plan.

The 133-page reorganization plan filed in U.S. Bankruptcy Court in New York is a key step toward Ryan Kavanaugh trying to get his company back into active film development. Relativity already auctioned off its television division to its biggest creditors earlier in the bankruptcy process.

But many challenges still confront the company, including raising the necessary capital to persuade Judge Michael Wiles that Relativity can go ahead as a viable concern. Prior to its July 29 Chapter 11 filing, the company suggested it had identified financial saviors, including VII Peaks Capital of the San Francisco Bay Area. But that capital infusions proved to be much smaller than touted and not nearly enough to save the company, which entered bankruptcy with $1.2 billion in liabilities and about $560 million in assets.

Critical to Relativity’s emergence is identifying new equity investors, as company founder Kavanaugh has been trying to do for months, without substantial success. Relativity said Wednesday evening that Jim Cantelupe, of Summit Trail Advisors, has committed to work with the company “to raise up to $100 million of new capital to fund the Plan, which funds are to be escrowed on or before December 31, 2015.”

The Relativity announcement says, “Relativity today took a significant step forward in its chapter 11 process and filed a plan of reorganization with the court. Upon emergence in late January, the company’s $35 million DIP [Debtor In Possession] loan will be paid in full, its debt load will be reduced to $60 million or less, and it expects to receive up to $100 million in new equity.”

The statement goes on to say that Relativity will release seven films “funded in part by a new $250 million Ultimates/P&A facility.” The statement does not specify the source of the new film release loans. The company’s statement adds that “the plan may evolve as the parties refine negotiations,” which the statement says is typical in complex chapter 11 cases.

A New York-based firm that previously loaned Relativity money for P&A — RKA Film Financing — said that Kavanaugh had misdirected some $85 million designated for film releases to general corporate expenses, such as salaries. RKA said in a lawsuit in New York state court that Kavanaugh had committed fraud by misdirecting the funds; the filing called him a “con man.” Kavanaugh responded with a lawsuit of his own, accusing RKA of trying to take advantage of Relativity’s weakened financial condition to squeeze money out of the company.

It’s not clear from the Relativity statement who in the company is in the position to develop new film projects. Almost all of the upper management of Relativity Studios exited the company in recent weeks, though a few continue on as consultants. A Relativity official said Kavanaugh has actively been looking for replacements.

Filed Under:

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 2