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The licensor of the 2012 surprise hit Act of Valor has come forward with some issues pertaining to the proposed auction of Relativity Media next month.
IATM is copyright holder on the film about an elite team of Navy SEALs who embark on a covert mission to recover a kidnapped CIA agent. Set up by the Bandito Brothers production company, IATM licensed Act of Valor to Ryan Kavanaugh‘s studio before it went on to gross $70 million at the box office despite no big stars and lukewarm reviews. The film has been identified as “one of the more important property interests” for Relativity.
Now, IATM is responding to a motion establishing the bidding procedure on Relativity’s sale. This will be addressed at a bankruptcy hearing in New York on Friday.
RM Bidder, formed by some of Relativity’s prepetition lenders, will make a $250 million “stalking horse” bid and hopes to sell Relativity in an auction proposed to take place on September 16.
IATM is not objecting to the sale nor the timing, but rather certain proposed conditions like the winning bidder assuming executory contracts free and clear of all liens.
The Act of Valor owner has a licensing deal with Relativity, and a collection account has been established for revenues on the film. IATM protects its stake to licensing money with a security interest on this account and so the company is worried whether the bidding conditions are “inconsistent” with the terms of its licensing agreement. The same is true for an agreement that IATM has with Relativity where the latter is supposed to pay on behalf of IATM all guild-mandated residuals.
More intriguing is notice given on Act of Valor: Swat, apparently a sequel.
“IATM takes issue with the Debtors’ representation that the Debtors currently possess a property interest in Act of Valor: SWAT,” says the company’s legal papers. “Instead, prior to the filing of the Debtors’ bankruptcy proceedings, IATM gave written notices terminating all negotiations for Act of Valor: SWAT.”
The company acknowledges that under a specific provision in the licensing deal, Relativity is entitled to a “right of first negotiation.”
IATM now says “as a matter of courtesy and notice to all prospective buyers who might intend to acquire the Debtors’ property, IATM intends to immediately exercise” the provision — meaning once Relativity is sold, the buyer will have 30 days to negotiate equity financing and distribution of Act of Valor: SWAT or potentially lose rights.
Finally, IATM says its Act of Valor licensing fees for the past quarter are now delinquent and that it “is willing to work with the Debtors in reconciling the amounts necessary to cure all monetary defaults,” but not willing to waive rights pertaining to the maintenance of collateral.
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