Relativity files suit against Citigroup

Claims breach of contract over financing deal

A legal battle has erupted between Ryan Kavanaugh's Relativity Media and banker Citigroup Global Markets over a multi-million-dollar financing deal to invest in films produced or acquired by Sony Pictures.

Relativity filed suit Tuesday in Manhattan federal court against Citigroup, claiming breach of contract. Citigroup filed its own lawsuit in New York Supreme Court in Manhattan the same day.

Relativity alleges Citigroup has tried to force it to change the terms of a financing deal inked in January 2007 that provided funding for projects with Sony.

Citigroup's desire to change the terms of the loan comes after the insurance company it secured a rating and "wrap" with, Ambac Assurance Corp., took on serious financial problems in the wake of the economic collapse.

Relativity claims the amendments to the deal would it at least $50 million.

In a statement, Sony said it does not comment on pending litigation but that "contractually the financing of our films is secure."

Citigroup claims the terms of the deal are flexible and that it has the right to amend it. It's lawsuit seeks to enforce the proposed amendments.