Relativity Bankruptcy: Profitable TV Unit Sees Silver Lining in Chapter 11 Drama

Relativity Media is in the eye of a hurricane as a Chapter 11 bankruptcy reorganization plays out in court and the company’s Beverly Hills headquarters amid conflicting agendas among lenders, creditors, investors and the company’s embattled founder, Ryan Kavanaugh.

Across town at the Hollywood offices of Relativity Television, it’s business as usual. Or at least as much as Relativity Television chief Tom Forman can make it in the face of a very big image problem. In fact, he expects the division ultimately to be better off after the bankruptcy reorganization as it will likely lead to more funding or a better strategic partner for the profitable TV arm.

“Everything that was in production is still in production. Everybody who was working for us a month ago is still working for us,” Forman told Variety. “We’re pitching and selling new shows. Unfortunately, the Relativity Media bankruptcy is a giant distraction but luckily nothing more than that right now.”

Relativity Television has been spared the layoffs, budget slashing and executive pay cuts that have hit the parent company because the television division is actually making money. In contrast to Relativity’s film operation, the TV unit is on track to generate about $150 million in revenue and about $10 million in earnings this year.

Relativity TV’s stronghold is unscripted series for cable, ranging from Food Network’s “Guy’s Grocery Games” and “The Great Food Truck Race” to GSN’s “The American Bible Challenge” to MTV’s “Catfish.” The company has inched into scripted television with CBS’ upcoming action-drama “Limitless,” based on the 2011 Relativity film of the same name, and the ABC Family comedy “Young and Hungry,” which bows next week. At the time Relativity was seeking new financing last year, the unit was valued at between $92 million and $118 million, according to an internal document from one of the company’s lenders obtained by Variety.

The big question is what becomes of Relativity Television as the bankruptcy process proceeds. The unit has had acquisition overtures in the past — no surprise given the consolidation boom among mid-sized unscripted production banners. There’s speculation that Forman could lead a group of investors to buy it out, or that he will try to recruit a strategic buyer along the lines of ITV, Endemol Shine Group, FremantleMedia or another one of the congloms that have been scooping up unscripted shops.

But Relativity Television’s fate in the near term could be decided by the outcome of the stalking-horse bid auction for Relativity Media as a whole that is scheduled to take place Sept. 21. That process that could lead to the company’s senior lenders taking control if no bidder emerges to top the $250 million floor price they offered in a document filed with the bankruptcy court.

Forman has been assured by key Relativity lenders that the television division would be well-funded if they are able to take over the company.

“I’m satisfied that they intend to capitalize television in a way that we’ve never been capitalized before,” he said. “That would be a pretty good outcome.” Forman would not elaborate on other potential scenarios other than to say that he has great confidence in the company’s future as a self-contained unit.

For now, Forman is spending a good deal of time racing around town to assure network execs that the sky is not falling on Relativity TV despite the dire headlines. In the past month, he’s landed pilot or presentation orders for new projects at Discovery, TLC, HGTV and Cooking Channel.

“We are continuing to produce and deliver hours and hours of television every day,” Forman said. “We have not missed any deadlines.”

There is no escaping the sense of frustration at the TV group at being dragged into the larger company’s financial drama. Relativity Television has long operated autonomously because it was originally set up in 2008 as a joint venture, then known as RelativityReal, between Relativity Media and Forman, an experienced unscripted producer. In 2013 Relativity Media bought out Forman’s stake and changed the company name to Relativity Television.

At present Relativity Television has 25 full-time executive staffers, not counting the hundreds of production staffers on its shows at any given time. Forman is unabashedly proud of the lean-and-mean operation that has grown on its accord without much in the way of investment from the parent company. The TV division, of course, has benefited from its association with Relativity Media in gaining access to branded film properties such as “Catfish” and “Limitless.”

“I’m unbelievably proud of what we’ve built. This company is robust and profitable,” Forman said. “It’s too soon to tell what’s going to happen but we do know this: there are plenty of strategic partners out there who could super-charge our television business.”

James Rainey contributed to this report.

(Pictured: Relativity Television’s Tom Forman speaking in June at Variety‘s TV Summit)

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