A number of investment and asset management firms, including TSSP, the credit platform of TPG, are evaluating the prospect of seizing control of Relativity if the company defaults on what is said to be $350 million in debt. Relativity founder and CEO Kavanaugh must come up with $150 million by the end of next week or risk losing control of the studio he founded in 2004.
Relativity’s lenders, including Colbeck Capital, have reached out to prospective investors about the possibility of taking over the company if Kavanaugh is removed as chief executive. Kavanaugh has feuded with Colbeck Capital, accusing partners Jason Colodne and Jason Beckman of leaking damaging information about the company to the press, and successfully pushed for their ouster from the board.
TPG and Colbeck declined to comment.
In a statement to Variety, Relativity spokesman David Shane said: “As we’ve said before, the company and its lenders entered into a formal agreement that allows Relativity additional time to close its previously agreed upon financing transaction. This agreement ensures Relativity additional liquidity as discussions continue. Ryan Kavanaugh, CEO, and Relativity are deeply appreciative of its lenders’ ongoing support, and the company looks forward to continuing to work with its lenders to position us for long-term success.”
Relativity is currenlty operating under strict conditions from lenders because of the debts that came due at the end of May. The company has retained FTI Consulting at the behest of lenders to monitor operations until the debt situation is sorted out.
Relativity’s lenders are said to have reached out to TPG and other potential investors in an effort to allow them to recoup some or all of their outstanding loans. The status of existing Relativity investors, including Steve Mnuchin and Ron Burkle, in a buyout scenario is unclear.
Bankruptcy reorganization is another possible path for Relativity, although the lenders are said to have hopes for bringing in new investors in order to be made whole that much faster.
Sources emphasized that any outside investment would come from a group of funds, not TPG on its own, and that any investment would come only if Kavanaugh is no longer CEO.
Tony Vinciquerra, a former top Fox TV executive who is a senior adviser to TPG, has been doing due diligence on the Relativity assets. That has sparked speculation that Vinciquerra might be tapped to run the company post-Kavanaugh if TPG were to take a stake. But sources close to the situation downplay that scenario.
Kavanaugh faces a number of issues as he scrambles to find fresh capital. Insiders say that Relativity’s film library is fully pledged out and has already been used as collateral in previous refinancing agreements. The company’s film division has not been successful, and has suffered a series of disappointments such as “The Best of Me” and “Out of the Furnace,” and is said to be overextended in its financial commitments. But the larger entity has some attractive businesses, including the Relativity Television banner, its sports representation arm and music division.
TPG has become an active Hollywood investor in the past few years. It owns a majority stake in CAA and has funded the startup STX Entertainment film and TV studio.