Federal Judge Did Not Fully Approve Relativity Media’s Bankruptcy Plan
At Monday’s hearing in US Bankruptcy Court, Judge Michael Wiles held back full approval of the Relativity sale, saying everyone needed more time to review the details. So, all parties will be back in court Tuesday morning.
But while the judge withheld final approval of the sale of Relativity’s TV assets, he complimented the parties and sounded as if he was predisposed to giving his nod.”The record shows the sale was conducted in good faith,” he said. “The sale of TV assets was made in sound business judgment. But parties are entitled to the details.”
On Friday, Anchorage Capital Group, Luxor Capital Group and Falcon Investment Advisors, aka the “Cortland Lenders” made a revised “stalking horse” bid of $125-M in canceled debt for Relativity’s television assets. With approval from the judge, they will now take over a cash flow positive division that produces such shows including MTV’s Catfish.
At today’s hearing, a lawyer for Relativity called a motion to approve the sale of TV assets “uncontested,” though he did note an objection from RKA, the P&A lender that previously sued Relativity CEO Ryan Kavanaugh for fraud.
RKA said it needed more time to review the sale. In court papers, they suggested Mr. Kavanaugh’s group is essentially becoming the new debtor-in-possession under an intricate agreement that would leave all but the TV assets to Relativity.
A group headed by Mr. Kavanaugh, who is now being backed by VII Peaks Capital, Joseph Nicholas and OA3 is putting up $60-M in cash and assuming $30-M in debt for assets such as distribution rights for unreleased films including Masterminds, The Disappointments Room and Kidnap as well as projects-in-development like Fighter 2 and Fletch Won.
The judge was asked to at least give preliminary approval, which led the judge to see if the many producers and distributors raising objections over the assumption of contracts had anything to say.
IATM, licensor of the surprise hit Act of Valor, spoke up with some broad concerns. And although there’s an additional hearing on 14 October to consider more objections on the assumption of contracts, others, including producer Brett Ratner’s attorney, raised concern about “splitting assets” before their objections were addressed.
Others were quite positive at the move to sell TV assets for $125-M.
Manchester, a subsidiary of Elliott Management and formerly one of the biggest critics of Relativity’s Chapter 11, spoke in support of the sale. Under the deal, if everything goes according to plan, Manchester will get a new $30-M debt note in Relativity and will be put in 1st lien position.
If everything goes according to plan, the deal to sell Relativity’s TV division will close on Oct. 20.
Even beyond that date, though, there will be a lot left to do. Before Relativity emerges from bankruptcy, Mr. Kavanaugh will have to present a plan for reorganization.
But what occurred during the past week got strong endorsements.
Stay tuned…
HeffX-LTN
Paul Ebeling
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