A judge on Thursday approved the sale of Relativity Media to UltraV Holdings, an investor group that is seeking a fresh start for the twice-bankrupt studio.
Relativity declared bankruptcy in May as it sought to shed debt in advance of a sale to UltraV, its largest secured creditor. UltraV held $73 million of Relativity’s secured debt, of which it bid $40 million to acquire the company. No other bidders came forward to challenge the sale.
The court approval follows settlements with Netflix and the committee of unsecured creditors, both of which had raised objections earlier in the process.
“Court approval of the sale today ends four difficult years for Relativity and marks a new beginning for the company,” Colin Adams, the company’s chief restructuring officer, said in a statement. “Relativity’s administrative and priority creditors will be paid in full and unsecured creditors, including creditors from prior cases, will see meaningful recoveries, funded in part by the company’s successful partnership with Netflix. We wish UltraV much success as they renew and grow Relativity Media.”
The once high-flying studio declared bankruptcy for the first time in 2015. It emerged the following year with a plan to raise $100 million in fresh equity. Those plans did not materialize, and the company was forced to sell off assets and slash its workforce before seeking its second reorganization this spring.
Following the second bankruptcy, the U.S. Trustee’s office raised concerns about $2.6 million in payments that went to CEO and founder Ryan Kavanaugh after the reorganization in 2016. The trustee sought a fuller accounting of payments on behalf of creditors in the first bankruptcy.
UltraV is a partnership of Sound Point Capital Management and a trio of executives: David Robbins, Larry Robbins and Lex Miron. According to court declarations, the group was first approached about an equity investment in Relativity in 2017. Those conversations resulted in UltraV acquiring $73 million in Relativity’s debt in February for an undisclosed sum, while simultaneously entering into a restructuring agreement to take control of the company.
One of the company’s most valuable remaining assets is its 2010 deal with Netflix, which expires at the end of the year. The deal pays substantially above-market rates for titles that Relativity provides to the platform. Netflix had sought to nullify the agreement, arguing that Relativity had breached it by allowing several titles to stream on rival platforms. Netflix also accused UltraV of trying to exploit the agreement by “pushing through any third-party-produced title that can be begged, borrowed, or bought in the marketplace between now and the end of the calendar year.”
Earlier this month, however, the two sides came to agreement under which the new owners will be able to stream up to 30 titles on Netflix. Netflix also agreed to pay $7.1 million in withheld payments and fees.
Kavanaugh has launched a new company, Proxima Media. He will also be paid $10,000 a month as a consultant to the new Relativity ownership group, with an incentive package that includes a 10% equity stake in any value above $150 million, should the company become worth that much. Under the restructuring, creditors are still able to pursue any claims they may have against Kavanaugh individually.
The creditors and their attorneys will also receive up to $3.1 million from the company under a settlement reached in June.
Correction: An earlier version of this story stated that Kavanaugh retains a significant equity stake in the company. Kavanaugh will have an equity interest only if the company reaches a $150 million valuation.