Relativity Bankruptcy: Details of Ryan Kavanaugh's Deal Revealed

Ryan Kavanaugh Cover Splash Without Text - H 2015

The results of an auction held on Friday for the assets of Relativity Media in Chapter 11 bankruptcy are becoming more clear thanks to new court documents filed on Monday.

Anchorage Capital Group, Luxor Capital Group and Falcon Investment Advisors (also known as the "Cortland Lenders") emerged the winner of Relativity's television assets with a revised stalking horse bid of $125 million in canceled debt. As such, they will now take over a cash flow positive division that produces such shows as MTV's Catfish, VH1's Astor and Black and CBS' Beat the Chefs. In total, pending a judge's approval, these three financial firms will control about 435 projects that have already been developed or are in development.

These financial firms will also be getting $95 million in cash to release their creditor claims related to Relativity's other assets. (When Relativity filed for Chapter 11 in late July, these financial firms held about $366 million in outstanding debt.)

A group headed by Relativity CEO Ryan Kavanaugh — who according to today's filing is now being backed by VII Peaks Capital, Joseph Nicholas and OA3 — is putting up $60 million in cash for Relativity's remaining assets, which potentially includes distribution rights for unreleased films including Masterminds, The Disappointments Room and Kidnap, projects-in-development like Fighter 2 and Fletch Won, film adaptation rights of TV shows, Netflix receivables for the film The Lazarus Effect, a right to 10 percent of producer fees for Limitless and Act of Valor, as well as the fashion, music and education divisions. The group will also be indebted to the Cortland lenders for $30 million.

Manchester Securities, a subsidiary of early Relativity backer Elliott Management, is putting up $35 million in cash to take over the DIP loan. Manchester, which was one of the most vocal critics of Relativity's Chapter 11 move with the argument that the company's prior charter precluded a sale without its consent, has agreed now to withdraw a pending appeal of its objections.

In a sense, each of the parties is walking away a bit less than they once had, but something is better than nothing. The deal hopes to be closed by Oct. 20. The law firms participating in this transaction were Jones Day on behalf of the debtor, Milbank Tweed on behalf of the Cortland lenders, O'Melveny & Myers as well as Ropes & Gray on behalf of Manchester, and Skadden Arps on behalf of Kavanaugh.