The bid is described as a large one, though it’s not certain it will be enough to justify selling pieces of the distressed company. There are also offers for its television operations.
A spokesman for Relativity declined to comment. It’s unclear if the money used to fund the bid is Kavanaugh’s own or if he has found a backer.
An auction for the film and television studio behind MTV’s “Catfish,” “Act of Valor” and both big and small screen versions of “Limitless” is taking place Thursday in New York City.
Initial bidding did not appear to be as intense as the company’s creditors and financial advisors had hoped. Companies appeared to be more interested in pulling away pieces of Relativity, particularly its television operation, as opposed to buying the entire operation outright. It appears as though a $250 million credit offer put on the table by senior lenders to the company may be the highest bid, unless a combination of an offer for the television assets and for the film pieces exceed that figure.
The lending group consists of Anchorage Capital, Luxor Capital and Falcon Investment Advisors, but these stalking horse bidders will likely be more interested in turning around and selling the assets instead of overseeing their continuing operations, experts say.
“These kinds of people are not in the business of running studios,” said Steven Gubner, managing partner of Ezra Brutzkus Gubner. “They are pure economic agents. They’re not into this for creativity or the pleasure of developing art. They are dollars and cents experts.”
It is also possible that the lenders might hold some of the assets, at least for the time being, and reinvest in them as a way to bolster their value.
Kavanaugh may be on hand in New York City Thursday to press his case. There is a precedent for having the head of a bankrupt company bid and win back an underwater enterprise. It’s also perfectly legal, lawyers tell Variety.
“There is no set rule against insiders purchasing assets at a sale of this kind as long as they disclose everything and it’s not structured in a way that appears like they got a sweetheart deal,” said Mark Scarberry, professor of law at Pepperdine University.
The bankruptcy process has been contentious at times, with lawsuits and objections alleging that Relativity’s leadership fraudulently used promotional funds to cover overhead expenses or obfuscated the extent of its financial difficulties.
A final sale of the Beverly Hills-based company is expected to be approved by U.S. Bankruptcy Court Judge Michael Wiles on Monday.
James Rainey contributed to this report.