As it approaches an expected bankruptcy filing on Wednesday or Thursday, Relativity Media is preparing to lay off up to 100 of its 350 employees, a source close to the entertainment company said Tuesday.
The job cuts are expected to hit hardest in the company’s digital, fashion and education units, all relatively new operations that are said to be a drag on the bottom line of the operation, which is saddled with $320 million in debt that it is struggling to refinance, said the source, who declined to be named discussing sensitive internal communications.
The number of employees being asked to leave is expected to be close to 90, but could creep slightly higher. Workers at the Beverly Hills-based company are expected to be informed Wednesday about the staff reductions. It’s likely that some of the cuts will hit Relativity’s film production unit. But the more successful Relativity television operation is expected to be spared cuts, as are the film marketing and distribution arms.
Also to be protected from the layoffs: workers who report to the joint venture between Relativity and EuropaCorp. Under the collaboration, EuropaCorp was expected to pay about $80 million (down from the initially-reported $130 million) to Relativity as part of a joint distribution and marketing program for the two companies’ respective film slates.
A bankruptcy by the company founded 11 years ago by Ryan Kavanaugh has been anticipated for weeks and several sources said it is likely to come in the next day or two. Kavanaugh, 40, has not spoken publicly about his company in recent days and Relativity has issued no statements about what will come next.
The heavily-leveraged operation has been under distress since May, when it was unable to repay a major loan and had to get an extension from lenders. Kavanaugh’s allies have suggested several times that he was on the verge of deals to help close a reported $320 million gap. But no solution has been forthcoming and employees inside the operation have reported high anxiety and a lack of clear messages from management.