Relativity Lenders Court New Investors to Take Control (EXCLUSIVE)

Relativity Debt Crisis: Lenders Court New
Imeh Akpanudosen/Getty Images

D-Day is nearing for Ryan Kavanaugh and Relativity Media.

A number of investment and asset management firms, including TSSP, the credit platform of TPG, are evaluating the prospect of seizing control of Relativity if the company defaults on what is said to be $350 million in debt. Relativity founder and CEO Kavanaugh must come up with $150 million by the end of next week or risk losing control of the studio he founded in 2004.

Relativity’s lenders, including Colbeck Capital, have reached out to prospective investors about the possibility of taking over the company if Kavanaugh is removed as chief executive. Kavanaugh has feuded with Colbeck Capital, accusing partners Jason Colodne and Jason Beckman of leaking damaging information about the company to the press, and successfully pushed for their ouster from the board.

TPG and Colbeck declined to comment.

In a statement to Variety, Relativity spokesman David Shane said: “As we’ve said before, the company and its lenders entered into a formal agreement that allows Relativity additional time to close its previously agreed upon financing transaction. This agreement ensures Relativity additional liquidity as discussions continue. Ryan Kavanaugh, CEO, and Relativity are deeply appreciative of its lenders’ ongoing support, and the company looks forward to continuing to work with its lenders to position us for long-term success.”

Relativity is currenlty operating under strict conditions from lenders because of the debts that came due at the end of May. The company has retained FTI Consulting at the behest of lenders to monitor operations until the debt situation is sorted out.

Relativity’s lenders are said to have reached out to TPG and other potential investors in an effort to allow them to recoup some or all of their outstanding loans. The status of existing Relativity investors, including Steve Mnuchin and Ron Burkle, in a buyout scenario is unclear.

Bankruptcy reorganization is another possible path for Relativity, although the lenders are said to have hopes for bringing in new investors in order to be made whole that much faster.

Sources emphasized that any outside investment would come from a group of funds, not TPG on its own, and that any investment would come only if Kavanaugh is no longer CEO.

Tony Vinciquerra, a former top Fox TV executive who is a senior adviser to TPG, has been doing due diligence on the Relativity assets. That has sparked speculation that Vinciquerra might be tapped to run the company post-Kavanaugh if TPG were to take a stake. But sources close to the situation downplay that scenario.

Kavanaugh faces a number of issues as he scrambles to find fresh capital. Insiders say that Relativity’s film library is fully pledged out and has already been used as collateral in previous refinancing agreements. The company’s film division has not been successful, and has suffered a series of disappointments such as “The Best of Me” and “Out of the Furnace,” and is said to be overextended in its financial commitments. But the larger entity has some attractive businesses, including the Relativity Television banner, its sports representation arm and music division.

TPG has become an active Hollywood investor in the past few years. It owns a majority stake in CAA and has funded the startup STX Entertainment film and TV studio.

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  1. Courting new investors?? That would be great for them! Hope they really got some good prospect investors to find fresh capitals and save its financial commitments. Otherwise, they left no choice but to file bankruptcy because of liquidation. And if you want to learn more about how this applies in the Australian context,

  2. Dunstan says:

    Another phony house of cards propped up by a major scammer.

  3. Ray Johnston says:

    I think every single production company has a responsibility, including the mini-majors, of returning Hollywood to the craft of making good films that people actually want to see. Out of all the films that Mr. Kavanaugh made only the one on Navy Seals was worth spending millions. Everything else he made was not good.

  4. Ray Johnston says:

    Sorry not a fan of Mr. Kavanaugh. He put out junk after junk after junk.

  5. C’mon Ryan, let’s pull another rabbit from that bag of tricks – hang on to your baby!

  6. Henry Deas says:

    Ryan Kavanaugh will prevail. We need him in this business.

    • Arlene Wisz says:

      where does this leave the film Solace [Hopkins/Farrell] which was due for American Release in Oct? It was released in Turkey in April….according to IMDB

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