Relativity's Movie Slate Imperiled as Bankruptcy Looms for Ryan Kavanaugh

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Relativity CEO Ryan Kavanaugh

Relativity could enter bankrutpcy by Wednesday, according to sources, unless Kavanaugh finds a new equity source to save the company he founded 11 years ago.

Movies at Ryan Kavanaugh's financially-embattled Relativity Media face an uncertain future, with some deals close to collapsing as the company moves closer to a possible bankruptcy.

Earlier this week, Sony sent a letter to Relativity stating its intention to terminate Relativity's deal for U.S. rights to The Bronze, according to sources. Relativity struck the $3 million pact with Sony Pictures Worldwide Acquisitions after the comedy — written by and starring The Big Bang Theory actress Melissa Rauch — debuted at the Sundance Film Festival in January.

Letters of termination are sent when a distributor has failed to satisfy, or "cure," various provisions of a contract. (A notice of termination would follow a cure letter). Sony and Relativity declined to comment regarding The Bronze, which was produced by the Duplass brothers.

Another high-profile project in question is Autobahn, the action film now titled Collide that stars Felicity Jones, Nicholas Hoult, Anthony Hopkins and Ben Kingsley, sources also said. However, a spokesperson for IM Global, a lead financier on the film, said the movie's status hasn't changed. "We are obviously monitoring the Relativity situation closely and we remain hopeful that the company's overall financial situation will have settled down in good time for Collide's slated release," a spokesperson for IM Global said.

Relativity's operations have come to a standstill, according to insiders. Although staff members are still getting their paychecks, there are restrictions on the use of corporate credit cards, and morale is said to be low. In June, Relativity hired FTI Consulting, specializing in corporate restructuring, to serve as an advisory on company spending, and FTI staff are on the ground working out of Relativity's Beverly Hills offices.

Kavanaugh's company has failed to meet a number of debt payment deadlines, and Relativity could face bankruptcy by next Wednesday unless Kavanaugh finds a new equity source. That means there is no money to market and promote upcoming releases, such as The Bronze, which is dated for release in theaters on Oct. 16, and Autobahn, set to go out Oct. 30.

Numerous sources say Relativity titles are being shopped around town by worried producers, although the company is intent on holding onto Masterminds, a comedy starring Zach Galifianakis, Owen Wilson, Kristen Wiig and Jason Sudeikis, and the Halle Berry action film Kidnap. In recent weeks, the release of both films have been pushed back, with Masterminds moving from August to October, and Kidnap to February.

The fate of other upcoming releases is unclear, including the horror film Before I Wake, directed by Mike Flanagan and set for release Sept. 25, and The Disappointments Room, a psychological thriller directed by D.J. Caruso that is likewise scheduled to hit theaters Sept. 25. (Generally, no company releases two films on the same date.)

Earlier this month, Relativity reached an agreement with the Toronto-based Catalyst Capital to purchase Relativity's senior debt of $130 million, but Relativity's subordinated debt-holders, led by Anchorage Capital, exercised an option to buy out Catalyst's stake, putting Kavanaugh back at square one. Kavanaugh subsequently accused Relativity lender Colbeck Capital of orchestrating a buyout scheme.

There are are several scenarios for what happens if Relativity goes into bankruptcy. Lenders could get their money back by selling the company, or they could end up owning Relativity and appointing new leadership. And Kavanaugh could still buy the company back if he finds a new equity partner.

Insiders say if lenders restructure the company and provide a cash infusion, many of the films could still be released by Relativity.

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