5:19pm PT by Eriq Gardner
Judge Officially Confirms Relativity's Reorganization Plan
Ryan Kavanaugh can now exhale.
U.S. Bankruptcy Judge Michael Wiles on Monday issued a 58-page findings of fact, conclusions of law and order confirming a plan of reorganization for Relativity Media. Although the plan doesn't become effective until some last-minute documentation comes in on new financing and the studio's Trigger Street deal with Kevin Spacey and Dana Brunetti, Relativity is now on its way out of Chapter 11 bankruptcy.
"The Plan fairly achieves a result consistent with the objectives and purposes of the Bankruptcy Code," writes Wiles, noting the work to achieve resolution with creditors of all stripes. "As evidenced by the overwhelming acceptance of the Plan, the Plan achieves the goal of consensual reorganization embodied by the Bankruptcy Code."
Relativity entered Chapter 11 amid bitter circumstances from lenders upon maturing debt, and will now be exiting Chapter 11 with the reduction of $630 million in debt, albeit without its profitable unscripted television division, which was sold during the bankruptcy process that started in late July. The judge's blessing will allow the studio to move forward in releasing Masterminds, The Disappointments Room, Before I Wake, Kidnap, Strangers 2 and other movies in the coming months.
The studio also scored a victory by having the judge reject Netflix's objection and ruling that Relativity "may assume the agreements" upon findings that that "there has been no default under such agreements" and that Kavanaugh's team has "provided adequate assurance of future performance." This is important because licensing to Netflix will provide substantial revenue over the next few years.
A hearing is scheduled for Feb. 17, with the judge considering some reserved objections over other contracts proposed to be assumed or rejected, but nothing big enough to curtail Relativity's exit.
The studio also has made an agreement with P&A lender RKA Film Financing, but that deal will mostly pertain to replacement debt notes and will not end a lawsuit accusing Kavanaugh of mismanaging funds.