Relativity invests in Capital idea

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Film financing and production outfit Relativity Media is forming the in-house investment arm Relativity Capital for principal investing in film, TV, video games and new-media projects.

New York-based hedge fund Elliott Associates Lp., which manages $10 billion in assets, will provide financing for Relativity Capital to initiate at least $1 billion in transactions. Once RC serves as the principal investor and completes the media deals, it will seek partnerships in most cases with other funds and banks.

RC will announce the first of these investments in the next two months. The deals will include studio slates, the Relativity Single Picture Business, library acquisitions and media-related cash flow investments. Video game deals are the furthest along in nonfilm deal negotiations so far, followed by television.

"Because we are acting as principals, (this) allows us to act even more quickly and efficiently," Relativity Media managing principal Ryan Kavanaugh said. "Effectively, Relativity Capital is Relativity's own media fund, and we expect to commit to over $1 billion of transactions in the near future."

The new division marks the latest stage in Relativity Media's dealmaking evolution. RC will allow Relativity to create deals without simultaneously seeking capital from hedge funds or banks, which requires handling complicated deal terms among several parties. It streamlines the process and allows Relativity more freedom to seek out projects with the sole backing of Elliott, which has been one of the main investors in previous Relativity deals.

The company began structuring deals for other companies (like arranging a $525 million revolving line of credit for Marvel Studios in 2004), then teaming as a principal with banks to provide film-financing packages for studios. The latter deals include its partnership with Citigroup Corporate and Investment Banking to create Beverly Llc., which co-finances nearly 75% of all Sony/Columbia Pictures properties under a five-year revolving credit facility.

Another major partnership was its $1.3 billion slate financing and production package Gun Hill Road Llc. with Deutsche Bank, providing separate film funds for Sony Pictures Entertainment and Universal Pictures. Relativity has structured and completed slate financing for films costing more than $8 billion.
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