A group of unnamed lenders behind Relativity Media has agreed to extend a May 31 deadline to allow the Hollywood mini-studio to postpone a critical debt payment, the company said Monday.
The agreement comes after long-simmering reports of financial strains at the company burst into public view late last month, when Relativity accused one of its financial backers of unfairly criticizing its economic stability.
The agreement with its lenders gives Relativity an unspecified amount of time to make the payment that was due at the end of May. The film company had previously said that a new financial arrangements had already been made and that the deadline was not of concern. But “the complexity of the transaction required additional time for us to close it, which this agreement provides,” said a source close to the company.
“Today the company and its lenders have entered into a formal agreement that allows Relativity additional time to close its previously agreed upon financing transaction,” said a statement from the company. “This forbearance 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.”
The New York Post previously had reported that financial strains had led to a dispute between Relativity and Colbeck Capital. The film company accused Colbeck’s principals of an attempt “to seize control of Relativity by trying to spread false rumors about the state of the company.”
Both then, and after the new forbearance agreement, sources at Relativity said that Kavanaugh remains “fully in control” of the company. It announced that Relativity Studios next film, “Masterminds,” will be released on August 19.
The company’s lenders could not immediately be reached for comment.
Kavanaugh’s company has several divisions — also producing television shows and managing athletes and models. But it is been best known as a maker of mid-budget films. The company has produced, distributed or structured financing for more than 200 movies, according to its website, though it’s not known for big success at the box office. Among its releases are “Oculus,” “Safe Haven,” “Act of Valor” and “The Fighter.”
Kavanaugh has said that he follows a strict formula for greenlighting films. By keeping costs down and hitting popular niches, he has said he does not need to make blockbusters to profit handsomely. Relativity released eight films last year and five were profitable, according to an individual close to the company. Its top domestic grosser, “Earth to Echo,” took in $45 million worldwide on an estimated production budget of $13 million, while “3 Days to Kill,” brought home $52.6 million on a $28 million budget.
Sources have reported that the company was pressed for cash, though individuals familiar with Relativity’s operations disputed that. One of those sources said entreaties for new investment were designed to plump up Relativity’s balance sheet in preparation for an IPO of company stock in 2016.
Kavanaugh’s firm announced in April that it had obtained $250 million in funding from VII Peaks Capital, a San Francisco-based investment management firm that is not a regular player in Hollywood. An individual familiar with Relativity said VII Peaks led a “consortium of companies” that delivered the $250 million infusion.
Key investor Ron Burkle has stood by Kavanaugh and Relativity as rumors swirled. “We have been very pleased with Ryan’s management and the way the company has been run,” said an individual close to Burkle. “We are excited about the company in every way.”