The prospective owners of Relativity Media’s television business are committed to investing a minimum of $60 million into the company behind such shows as MTV’s “Catfish” and CBS’ “Limitless,” according to court filings.
That will be comprised of pumping $30 million to $40 million in operating cash, and the buyers say they will assume a $30 million note receivable. They project the new company, which will take a different name, will be debt free. In addition, the buyers predict that Relativity’s existing accounts payable obligations will be less than $5 million.
The group is comprised of investment firms such as Anchorage Capital, Falcon Investments and Colbeck Capital which are owed more than $360 million by Relativity. They are seeking court approval for a deal that would allow them to forgive $125 million worth of that debt in exchange for taking ownership of Relativity Television.
The buyers say they plan to offer new contracts to all existing Relativity TV employees, starting with CEO Tom Forman.
In court filings, Zolfo Cooper senior consultant Robert Solomon, who is advising the investment group, describes the television business as “growing, profitable and producing positive cash flow.”
That’s in stark contrast to its parent company. Relativity filed for bankruptcy this past summer citing $1.2 billion in liabilities and assets with a book value of just $560 million. In a separate bid, founder Ryan Kavanaugh and a group that includes VII Peaks Capital, investor Joseph Nicholas and the Ron Burkle-backed investment firm OA3, are trying to come up with a plan to buy back the other parts of the company, including its film studio, sports agency stake and an investment in a for-profit school.
The television group’s bid was approved by U.S. Bankruptcy Court Judge Michael Wiles last week, and there is a hearing on Wednesday to deal with remaining objections to the sale from companies like Scripps, Viacom and A&E that have contracts with the bankrupt company.
In an omnibus filing the television investment group and Solomon argue that the companies’ objections should be overruled. They argue that throughout the bankruptcy, the television operation has continued to deliver episodes and predict that despite the Chapter 11 filing, this year will be a record in terms of episodes delivered, revenue and earnings.
“The Investor Group is committed to the long term success of the TV Business,” Zolfo Cooper’s declaration reads. “There have been minimal disruptions in the TV Business’ workforce throughout the bankruptcy process and there is no indication that the emergence of the business to new ownership will do anything other than solidify the commitment and longevity of their workforce.”
If the television business’ management team — a group that includes Forman and managing director Andrew Marcus — decline to remain with the company than Cooper said he and his team from Zolfo Cooper will oversee operations on an interim basis. That continuity gives the objectors adequate assurance their issues will be resolved, the filings argue.