UPDATED: A bank that loaned tens of millions of dollars to Relativity Media for operating expenses and films has asked for a delay in Monday’s scheduled court hearing for confirmation of the entertainment company’s plan to exit bankruptcy. CIT Bank said Ryan Kavanaugh’s company is asking a judge to confirm the plan, while leaving the lender and other parties “in the dark” about crucial financial details.
The letter Friday morning to U.S. Bankruptcy Judge Michael Wiles says that Relativity has missed required deadlines for filing financial disclosures and given only partial information in other instances. It requests a delay of at least one week to allow time for the information to be disclosed and digested by CIT and other parties.
It was not immediately clear how Wiles would respond to the request, which comes six months after Kavanaugh filed for Chapter 11 protection, citing liabilities of nearly $1.2 billion and assets with a book value of $560 million. Relativity recently announced that it had raised a required $100 million in new investment, to jumpstart its stalled film operation, though it has declined to give details. It also announced the hiring of actor Kevin Spacey and his producing partner, Dana Brunetti, to run Relativity Studios, though one prominent creditor, Netflix, questioned whether that arrangement was sealed.
Relativity, which was believed to be formulating a response, issued a statement. “We’ve continuously worked closely and in good faith with CIT to resolve their objections,” the company said. “Furthermore, we have received votes of acceptance for our Plan of Reorganization from the overwhelming percentage of our unsecured creditors while resolving the majority of the outstanding objections to our plan. CIT’s postponement request is unfounded, and we believe that continuing our path to emergence from Chapter 11 remains in the best interest of all of our stakeholders.”
The entertainment company’s lawyers responded with a letter of their own, asking Judge Wiles to hold Monday’s hearing, as scheduled. They said that minimal delays in Relativity’s filings had not prejudiced the case against CIT Bank. The letter, from lawyer Bennett L. Spiegel, depicts the bank as one of a few holdouts against the reorganization, saying that other lenders — including RKA Film Financing, Macquarie and subsidiaries of the Elliott Associates hedge fund — had agreed to the reorganization.
But CIT Bank, which loaned money for production of the films “Masterminds” and “The Disappointments Room,” argues that Relativity is trying to push through a reorganization that is not fully baked. The bank’s letter to Wiles said Relativity has “set the stage for a grossly unfair confirmation hearing, apparently designed to deprive CIT of even the most basic information necessary to prosecute its objections.”
A committee representing unsecured creditors, who are owed roughly $90 million by Kavanaugh’s company, previously voted to accept the reorganization plan, in what the company depicted as a watershed moment. CIT’s lawyer, Vadim J. Rubinstein, suggests that the outcome of voting by some parties might change once they see the “obsolete” earlier proposal replaced by a final financial plan. “Parties should be entitled, and may be motivated, to reevaluate their votes on the plan,” Rubinstein wrote.
Another objection comes from Netflix. The streaming service, in an earlier filing with the court, made arguments similar to CIT’s: that Kavanaugh’s company had not adequately disclosed how it would finance films going forward and had not proven that it had a solid management team in place, capable of making and distributing movies. Relativity rejected those arguments, saying Netflix was merely trying to use the bankruptcy to negotiate better terms on the films it acquires.