8:43am PT by Eriq Gardner
Relativity Sale Postponed in Latest Bankruptcy Hearing
In a short Friday morning hearing in a New York court, the parties to Relativity Media's bankruptcy agreed to postpone the sale of the company.
The deadline for bids on the studio was extended from Sept. 11 to Sept. 20, with the auction to be held by Oct. 1 in hopes of selling the company by Oct. 20.
In addition, Relativity requested $2.5 million more in debtor-in-possession financing to cover their expenses on the extended timeline. The debtor-in-possession financiers, who previously agreed to a $45 million DIP loan, agreed to the request.
The next hearing in the bankruptcy is now scheduled for Aug. 25. In the interim two weeks, there will also be modifications made to the bidding procedures in hopes of resolving objections from creditors and related parties filed in a rush this week.
In court Friday, Relativity lawyer Richard Wynne of Jones Day said despite the request for the additional $2.5 million DIP loan, the company's finances looked to be improving. Representatives for Blackstone Group, which will handle the auction, also said they've made "great progress" in locating buyers for the studio. The attorneys spoke of the "balancing act" of timing since they didn't want Relativity to lose value.
"That sounds great," responded Wiles, later applauding the parties for taking positive steps to work out some of the objections.
In one of Hollywood's biggest ever bankruptcies, Relativity Media filed Chapter 11 on July 30. The move was made after the Ryan Kavanaugh studio searched for months to resolve more than $330 million in debt that had come due. Ultimately, after being outmaneuvered by a couple of financial firms, Relativity made a deal with three of its prepetition lenders (Anchorage Capital Group, Luxor Capital Group and Falcon Investment Advisors) to put up $45 million in debtor financing. This group, operating as an entity known as RM Bidder LLC, has proposed making a $250 million "stalking horse" bid in the sale of Relativity's assets.
As fairly typical in bankruptcy cases, the creditors have been fighting for more time, possibly with an eye towards lining up bigger and better bids that would make themselves whole.
The financial firms that had put up P&A money for Relativity's upcoming slate of films including Masterminds, Kidnap and The Lazarus Effect — and have a secured interest on these assets in the event of default — sounded the most fury with talk of seizing the films and selling them off to other studios. Today in court, Jude Wiles nodded to their concerns, looking to get some signal that their objections would also be dealt with accordingly. Relativity's lawyers said they would.
Others including those with licensing relationships with Relativity like Viacom and Netflix or those getting profit participation and residuals have asked Judge Wiles in motion papers for better information about the impact of sale of assets, some modifications and a less aggressive schedule.
Some of the objectors have made an issue of the fees and other protections proposed for the three financial firms pledging the money. In papers filed this week, the Committee of Unsecured Creditors also made the surprising revelation that it had found an entity beyond the proposed group of stalking horse bidders who had expressed interest in providing Relativity "alternative financing with an increased borrowing level."
These issues will be reserved for the next hearing, but Albert Togut, attorney for the Committee of Unsecured Creditors, said he was "encouraged by the good faith in helping us get where we need to."
The only hint of dissatisfaction at today's hearing came from an attorney at Manchester Library Company, which was the only entity to file an objection under seal after pursuing discovery and depositions in the past two weeks about the circumstances of the Relativity bankruptcy.
Evan Jones, attorney for Manchester, said he was prepared to move forward with the firm's objection and is continuing to fight for more documents. "We are the largest single creditor," he said. "If this is not done properly, we will become the largest unsecured creditor."