UPDATED: Embattled Relativity Media issued layoff notices to 75 of its 350 employees Wednesday, another sign that the debt-laden entertainment company is on the verge of a bankruptcy filing.
The workers received pinkslips just after 10:30 a.m., and senior managers who remained with the company were asked to accept pay cuts.
Word came to workers after CEO Ryan Kavanaugh’s repeated failure to find new investors or loans to plug a yawning $320 million debt obligation. Relativity has postponed the release of several films, stopped payments to many vendors and left workers wondering about the future of the company.
The exact units impacted by the layoffs were not immediately known, though the reductions were expected to fall most heavily on Relativity’s ancillary fashion, education and digital units. Those are relatively new operations that are said to put a particularly onerous drag on the bottom line of the Beverly Hills-based company.
While film distribution and promotion jobs were supposed to be protected, sources said that film production jobs would likely go out the door. Relativity’s more robust television operation was also likely to have fewer job cuts.
The continued retreat of Relativity operations represented another signal of an impending Chapter 11 filing, which two sources close to the company now said is expected to come on Thursday. The company hopes a filing will help it to reorganize and emerge stronger, under its current leadership, though previously there has been pressure from some lenders to force Kavanaugh out.
The 40-year-old Relativity CEO has hopscotched from one potential financial savior to another in recent weeks, though none has been willing to close the gap and provide the company with the year of breathing room that Kavanaugh hoped for. Toronto-based Catalyst Capital briefly emerged as a possible white knight — buying $130 million in Relativity debt. But the company was quickly supplanted by an earlier lender, Anchorage Capital of New York, that was not willing to grant continued forbearance.