Ryan Kavanaugh Tells Staff He's Received Preliminary Approval to Keep Most of Studio (Exclusive)
In an email obtained by The Hollywood Reporter, Kavanaugh says the move "should be ratified by the Court in the next 48 hours."
As Relativity Media all but finalized a deal to sell its TV division for $125 million Tuesday, the studio's CEO, Ryan Kavanaugh, sent an email to his staff, saying that he has received preliminary approval to keep most of the studio's remaining assets.
The Hollywood Reporter has obtained that email, which went out Tuesday afternoon following a back-and-forth day for Relativity in bankruptcy court in New York. Despite receiving approval to sell the TV division to Anchorage Capital Group, Falcon Investment Advisors and Luxor Capital Group, Relativity encountered an eleventh-hour roadblock concerning an investment firm that allegedly pledged $30 million to help Kavanaugh's company close the transaction for the remainder of the studio but imposed conditions.
Nevertheless, Kavanaugh wrote to staffers hours later: "We anticipate that we will emerge from chapter 11 with all of our assets and operating businesses (we sold only the unscripted television business), with 90 percent reduction of debt."
The email indicates that Kavanaugh and his lawyers are confident that they have reached a resolution to buy back the studio, regardless of a snag with the investment firm VII Peaks.
The email also downplayed the speculation that Relativity board member Ron Burkle has assumed control of Relativity's sports division. "There was also a rumor that we sold our ownership in Relativity Sports," wrote Kavanaugh. "That is false. We hold the same amount today as we did prior to the process and continue to be excited about all of our businesses. It is our intent to work closely with Ron Burkle and get much more active in integrating sports into our day-to-day business, which Colbeck did not enable us to do prior to the chapter filing."
Earlier Tuesday, Relativity filed an emergency motion seeking to compel the investment firm VII Peaks to reserve the money pending an adversary proceeding. One of the conditions of the TV deal was that Kavanaugh's group would owe these companies $30 million. The money was to come from VII Peaks, which Relativity presents in its new court papers as having "absolutely and unconditionally agreed to contribute" the money at the time of the auction of Relativity's assets. According to Relativity's motion, VII Peaks indicated late Friday that "it does not intend to satisfy its obligation unless certain preconditions are met."
For months, Kavanaugh has been at war with Colbeck Capital, which played a key role in a $350 million debt-financing deal with Relativity back in 2012 that was used for funding films and for business expansion. In May, Kavanaugh forced Colbeck partners Jason Colodne and Jason Beckman to resign from the Relativity board. Colbeck will have a small stake in Relativity's TV division once the court finalizes the deal.
Relativity declined to comment on the email.
Relativity filed for chapter 11 bankruptcy production in July. At the time, the embattled studio listed its debt at $500 million-$1 billion and its assets at $100 million-$500 million.
The full text of Kavanaugh's email can be found below.
I wanted to share an update with you on an important milestone we’ve achieved toward the company’s emergence from chapter 11 with a significantly strengthened balance sheet. Today, we closed transactions to sell the television division for $125 million. Additionally, as Chairman and CEO, I have led an investor group to acquire the rest of the company, which got preliminary approval, and should be ratified by the Court in the next 48 hours.
This simply means that we anticipate that we will emerge from chapter 11 with all of our assets and operating businesses (we sold only the unscripted television business), with 90 percent reduction of debt.
In the near future, Relativity will file a plan of reorganization with the Court that will detail the company’s capital structure and its strategy for long-term growth with film, digital, music, sports and branded entertainment, continuing to build its asset base to offer brands unique access to a fully integrated 360 degree content engine. There was also a rumor that we sold our ownership in Relativity Sports. That is false. We hold the same amount today as we did prior to the process, and continue to be excited about all of our businesses. It is our intent to work closely with Ron Burkle and get much more active in integrating sports into our day to day business, which Colbeck did not enable us to do prior to the chapter filing.
I want to personally thank you again for your continued focus, dedication and loyalty throughout this process. I’ll continue to keep you updated.
We have some very exciting events coming.