The case of Relativity Media has long been one that defied clear outcomes. Promises of new investment came and went, as did hoped for film release dates, often without fulfillment. The company seemed near death many times, only to come back from the brink.
So it is with this week’s revelation of the apparent departure of Ryan Kavanaugh as CEO and Dana Brunetti as president of the troubled film production and distribution company. Their departures seemed like confirmation that Relativity has finally gone down for the count.
But the ultimate meaning of the news remains unclear a day later, as the changes remained without a clear explanation. And, as of Wednesday afternoon, they included a spokesperson’s statement that Brunetti maintained an ownership stake in Relativity and a production deal with the studio. The statement also suggested Kavanaugh and Brunetti would continue “working closely together going forward,” along with a newly-named president of production for Relativity, Brett Dahl.
This flew in the face of news earlier from individuals close to Brunetti, who suggested the longtime producer could be ready to strike out on his own again, and also continued to flummox Relativity employees and creditors, who are not sure just where the once ambitious company is headed.
The representative of a couple of creditors from Relativity’s protracted bankruptcy case said they believe that Chapter 11 reorganization now could be converted to a Chapter 7 liquidation of the company. The representative of another company owed money by Relativity was not optimistic about getting paid, saying: ”It bears all the signs of ending up a big smoking crater.”
But a couple of lawyers representing creditors in the case said that even though Kavanaugh’s restructuring of his company looks like an abject failure that their clients are loath to push for a liquidation. They believe that a sell-off would produce very little, noting that Relativity has few tangible assets. It does own a small film library, but the proceeds are already dedicated to repay specific loans. So creditors have been content to hold on, hoping Kavanaugh can again conjure up new investment to help pay the bills.
Finances at the Beverly Hills-based company are so challenged that the lawyers, bankers and others handling the bankruptcy, alone, are owed more than $15 million that has not been paid. And prospects for collection of those fees are not bright, according to two lawyers involved in the case.
While attorneys received at least partial payment of their bills, some of the small business people owed money by Relativity said they have seen no payments and don’t expect to collect any time soon. One vendor, owed hundreds of thousands, said his company has been promised a partial repayment by a Relativity executive.
“They say they are looking for some ways to make payments, but it remains to be seen how that is going to work out,” said the businessman, who declined to be named. “There seems to be a fascinating mixture of hyperbole, magical thinking or magnificent flights of fancy over there. I have no idea where they really are.”
And Relativity workers who said they have been asked to go without pay during a two-week holiday break (something the company denied, without offering specifics) said they are not sure their jobs will still be available when their winter vacation ends on Jan. 3. Employees expressed frustration that, despite the watershed developments at the company, they had not heard a word directly from Relativity management. “A lot of people don’t believe they will be back,” said an individual close to the situation, who asked not to be named.
Part of the confusion about next steps comes because Relativity has released no definitive statements. And Kavanaugh and Brunetti have been similarly quiet, at least publicly. Even their popular Twitter feeds — often the scene of frequent touts and pronouncements about the company — have been silent on Relativity in recent days.