Cash flows into Relativity

Hedge fund grows stake in company; Kavanaugh looks beyond pics

Ryan Kavanaugh's Relativity Media is strengthening its ties with Elliott Associates, the hedge fund that has been its primary source of capital, receiving a cash infusion of an undisclosed sum in exchange for a larger stake in the company.

The move does not fundamentally change the ownership position that Elliott holds in Relativity, which will remain lower than 40%.

But Relativity execs are hopeful that the new capital will allow the company to expand into areas outside the movies — such as video games, publishing and television — as well as broaden its operations within film.

Included in this potential expansion are film-library buys and even stakes in distribution outfits, which the company has yet to invest in heavily (though the money is not earmarked for any specific purpose).

"What this does is solidify our role as a competitive media entity," Kavanaugh said.

The news comes on the same day that Media Rights Capital announced a $350 million debt facility with JPMorgan Chase and Comerica, with both announcements timed to show that the financing entities are flourishing despite the difficult times on Wall Street.

Relativity, via its Relativity Capital Holdings, is financing about three-quarters of Universal's upcoming slate in a deal known as Beverly 2. It also is continuing to finance or co-finance a host of other pictures, including such titles as Rob Marshall's "Nine" and Jim Sheridan's "Brothers."

Relativity remains one of the only nonstudio entities that can fully finance, and thus essentially greenlight, a film development project. But its efforts in other media have been more modest.

Despite the larger issues in the financial world, Elliott said it wants to continue investing in Relativity. Portfolio manager Jesse Cohn said that execs at Elliott believe "there exists significant opportunity for Relativity Capital to continue to acquire complementary media assets at highly attractive valuations."

MRC noted in a release that "the financing was completed during the worst week in U.S. credit markets in more than 75 years." The money will be used to finance film, TV and digital projects, with a first closing of $295 million and the remainder potentially closing within the year. (partialdiff)