Relativity committee, Manchester parties ink $137 million settlement

By Caroline Salls

Pittsburgh, Jan. 14 – Relativity Media, LLC’s official committee of unsecured creditors requested court approval of a $137 million claim settlement with several Manchester Securities Corp. parties, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

The Manchester parties include Manchester Securities, Manchester Library Co. LLC, Heatherden Securities LLC, Heatherden Securities Corp., Heatherden Holdings LLC, Beverly Blvd 2 Holdings LLC, Beverly Blvd 2 LLC, Elliott Management Corp., Elliott Associates, LP, Elliott Capital Advisors, LP, Elliott International, LP, Braxton Associates, Inc. and Elliott International Capital Advisors Inc.

The committee said the Manchester parties agreed to purchase the company’s debtor-in-possession loan, which would be reduced to $35 million, in connection with Relativity’s credit bid sale of its television assets.

In addition, the committee said Manchester Securities holds a $137 million junior secured claim against the Relativity debtors, which the committee alleges is undersecured.

In connection with its investigation of claims and potential causes of actions against the Manchester parties, the committee said it determined that claims exist against the Manchester parties in connection with transactions that took place in 2011 and 2012. The Manchester parties disagree with the committee’s assessment.

Specifically, the committee said it believes that the estate could assert a fraudulent conveyance claim against the Manchester parties to recover the value of class A Interests that were transferred because Heatherden received greater than reasonably equivalent value for its $1 payment at a time when Relativity was insolvent on a balance sheet basis.

The committee said the Manchester parties had an alleged $137.08 million claim as of Relativity’s bankruptcy filing date, comprising more than 65% of the company’s estimated general unsecured claim pool.

Settlement terms

The principal terms of the proposed settlement include the following:

• The Manchester claim will be fixed and finally allowed in the amount of $137 million;

• Manchester Securities will waive its right to distributions on the Manchester claim made from the first $35 million in distributions to general unsecured creditors. That amount will be increased to $70 million if Manchester Securities objects to Relativity’s plan of reorganization, the court denies confirmation of the plan as a result of Manchester’s objection, and either a plan of liquidation is confirmed instead of the reorganization plan or the Chapter 11 cases are converted to Chapter 7 or dismissed;

• The committee will agree not to object to the approval or payment of specified fees;

• Manchester Securities will retain the right to vote its claim in favor of or against any Chapter 11 plan, but will agree to vote in favor of the plan if conditions are met; and

• The period under Relativity’s final DIP financing and cash collateral order for the committee to bring a challenge against the Manchester parties will be extended to one business day after the earlier of the court ruling the settlement motion or termination of the settlement.

The Manchester parties can terminate the settlement if an order is not entered by Jan. 27.

A hearing is scheduled for Jan. 20.

Relativity Media is a media company based in Beverly Hills, Calif., that filed for bankruptcy on July 30. The Chapter 11 case number is 15-11989.

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