Ryan Kavanaugh, Investors Paying $60 Million, Assuming $30 Million In Debt, for Relativity

UPDATED: Ryan Kavanaugh and a group of investors that includes VII Peaks Capital, Joseph Nicholas and the Ron Burkle-backed investment firm OA3 will pay $60 million to purchase parts of Relativity Media and assume another $30 million in debt, according to court filings.

In addition, Elliott Management, an investment firm that had clashed with Kavanaugh in the past, will contribute $35 million in cash. News that Kavanaugh had won the rights to his bankrupt company was announced on Sunday, but a press release touting the deal did not provide information about his financial partners.

If granted approval, Kavanaugh gets the company’s film studio, a stake in a distribution joint venture with EuropaCorp, an investment in a for-profit school and a 25% share of a sports agency.

However, he does not get rights to the studio’s television arm. That goes to a group of creditors that includes Anchorage Capital, Luxor Capital and Falcon Investment Advisors. The hedge funds have agreed to pay $125 million for that business and plan to reinvest and rechristen the company.

A hearing is scheduled to take place in U.S. Bankruptcy Court on Monday afternoon, during which Judge Michael Wiles will decide whether or not to approve a sale. Relativity filed for bankruptcy last summer, citing $1.2 billion in liabilities and assets with a book value of just $560 million.

A number of objections to the sale proposal are anticipated, in particular from producers and other partners who have said they do not want their contracts passed from the pre-bankruptcy Relativity to any new entities, at least without their approval.

One producer who previously objected to his contract being transferred said through his lawyer that the sale of Relativity Television could also be challenged. By suggesting that the company could only be obtained for a bid that exceeded the months-old $250 million stalking horse offer, Relativity discouraged additional bidding on its television unit, said the lawyer, who asked not to be named discussing sensitive negotiations.

This effective “feint” by Relativity, toward one sort of bidding, meant that credible contenders for the TV assets remained on the sideline. The lawyer who has been involved in the case said he expected to see an objection lodged, saying that the maneuver meant the auction did not maximize value and therefore should be ruled invalid by Judge Wiles.

RKA Film Financing, a firm that loaned more than $75 million to Relativity to release films, also filed papers objecting to a quick decision to the sale plan.  The financier called the planned TV sale “at best confused and at worst contradictory” and said it needed substantially more time to review more than 700 pages of new information filed in court Monday by the Relativity and the lenders who are seeking the TV business.

 

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