UPDATED: After a flurry of objections this week to the fast-tracked auction of bankrupt Relativity Media, the senior lenders controlling the company agreed to push the sale back two weeks, to Oct. 1, and to delay final arguments about the bid procedures until late August.
Those moves in U.S. Bankruptcy Court in Manhattan Friday morning meant that what could have been a contentious debate on the future of the entertainment company, founded by Ryan Kavanaugh, was postponed until Aug.t 25.
Judge Michael Wiles agreed to postpone the final discussion on bid procedures and approved $2.5 million in additional financing to keep Relativity and the bankruptcy process going until the Aug. 25 hearing. That money is on top of the $9.5 million in interim “debtor in possession” financing that the judge approved on July 31 — the day after Relativity declared bankruptcy.
Attorney Richard Wynne, representing Relativity, agreed to the delayed hearing initially proposed by unsecured creditors in the case who are owed some $89.9 million. Wynne said his talks with attorneys for creditors “have resolved many of the objections of the proposed [auction] order.”
The lawyer said that the financial adviser to the bankrupt company — which has almost $1.2 billion in liabilities and only $560 million in assets — has already been making “great progress in the sales process and talking to many parties.” The adviser, the Blackstone Group, has set up a data room where potential bidders can get details of Relativity’s finances.
The senior lenders driving the auction process –Anchorage Capital, Luxor Capital and Falcon Investment Advisors — have made a $250 million “stalking horse” bid that they hope will become the floor for other offers on the company, or its pieces. Some creditors have suggested they would like the sellers to specify the value of each of the company’s units, particularly its television division, in hopes of maximizing the bidding.
Wynne said the added two weeks before the auction provide more time to lure additional bidders without losing the imperative of a quick sale that will preserve the company’s maximum value.
Under the new proposed sales schedule, all interim dates for the Relativity sale would be moved back:
Bidding deadline: from Sept. 11 to Sept. 25
Notice to qualified bidders: Sept. 14 to Sept. 28
Auction: Sept. 16 to Oct. 1
Court hearing on sale: Sept. 21 to Oct. 5
Closing: Oct. 2 to Oct. 20
A lawyer for Manchester Securities Corp. said the slowed calendar for the sale ameliorated some of the firm’s concerns. But the attorney, Evan Jones, also noted that Manchester — a subsidiary of Elliott Associates, the hedge fund that helped fund Relativity’s startup as a studio — continues to have concerns that an improperly conducted auction could turn it into “the single largest unsecured creditor.” The firm is owed $137 million and is in danger of recovering little or none of that money. “We would prefer not to see that,” he added.
Wiles had expressed concerns during the July hearing about rushing an auction of the company before all parties had a chance to be heard. The judge on Friday called the slow-down and discussions among the factions a “constructive step.”
“I applaud the parties for attempting to work out their differences on these issues and trying to come to a common understanding on how we proceed,” Wiles said.