Relativity Media bankrupt; lender entity submits lead bid for company

By Caroline Salls

Pittsburgh, July 30 – Relativity Media, LLC and some of its subsidiaries filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Southern District of New York to strengthen its balance sheet and recapitalize the company.

The company said Relativity Sports, Relativity EuropaCorp Distribution and Relativity Education were not included in the Chapter 11 filing.

According to a news release, Relativity will conduct a sale process for the company under Section 363 of the Bankruptcy Code. To this end, Relativity said it has entered into an agreement with RM Bidder LLC, an entity formed and owned by some of the company’s pre-bankruptcy lenders.

Under the agreement, RM Bidder will acquire substantially all of the assets of Relativity, subject to Bankruptcy Court approval and an auction process. RM Bidder’s bid will serve as a starting point for a sale and auction process that will be conducted by Blackstone Group LP and FTI Consulting LLC.

The company said the auction process is expected to conclude with a sale closing in early October.

Relativity’s Chapter 11 petition said it has been unable to obtain further forbearances from its secured lenders and unable to obtain additional financing absent the bankruptcy filing.

Financing commitment

In conjunction with the filing, the company has received a commitment for $45 million of debtor-in-possession financing provided by a group of pre-bankruptcy lenders.

Relativity said this DIP financing, combined with cash generated by ongoing operations, will be available to fund the Chapter 11 process.

Specific sale process and DIP financing terms had not yet been filed with the court late Thursday evening.

Business restructuring

“The actions we are announcing today will protect our valuable franchise and allow us to emerge as a stronger, more focused company,” chief executive officer Ryan Kavanaugh said in the release.

“Our board and management team explored a variety of options to refinance Relativity’s debt, and we ultimately determined that the protection afforded by a court-supervised reorganization process will provide additional time and structure to achieve our financial and strategic objectives.”

As part of the reorganization, Relativity said it is restructuring some of its businesses, and 75 full-time positions have been eliminated. In addition, Relativity will wind down M3 Relativity, its fashion division.

The company said Kavanaugh continues to be CEO and chairman of the board, and Relativity’s senior core executive team remains in place.

Relativity will continue its business operations as the company completes its restructuring, the release said.

Debt details

According to court documents, Relativity has $500 million to $1 billion of both assets and debt.

The company’s largest unsecured creditors are

• Carat USA of Santa Monica, Calif., with a $36.81 million trade claim;

• Palisades Media Group of Santa Monica, Calif., with a $5.17 million trade claim;

• Cinram Group, Inc., based in Toronto, with a $4.2 million loan claim;

• Technicolor Digital Cinema of Ontario, Calif., with a $3.06 million trade claim;

• Technicolor, Inc. of Hollywood, Calif., with a $3.06 million loan claim;

• Cinedigm Digital Cinema Corp. of New York, with a $1.95 million trade claim;

• Left Behind Investments, LLC of St. Catharines, Ont., with a $1.81 million trade claim;

• American Express, based in New York, with a $1.52 million business credit cards claim;

• Say Media, Inc. of San Francisco, with a $1.49 million trade claim; and

• Kasima, LLC of Mahwah, N.J., with a $1.05 million trade claim.

Heatherden Securities LLC and YC Relativity LLC each own more than 10% of the equity interests of parent company Relativity Holdings LLC.

Brian G. Kushner will be Relativity’s chief restructuring officer. The company is represented by Sheppard Mullin Richter & Hampton LLP and Jones Day.

Relativity Media is a film studio based in Beverly Hills, Calif. The Chapter 11 case number is 15-11989.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.