Relativity Still in Limbo: Debt Is Down But New Financing, Kevin Spacey Not Yet Secured

U.S. Bankruptcy Court needs another day to consider Ryan Kavanaugh‘s reorganization plan

Kevin Spacey and Dana Brunetti‘s deal to join the creative leadership at Relativity Studios isn’t signed yet, lawyers for the company revealed Monday in U.S. Bankruptcy Court in Manhattan.

CEO and Chairman Ryan Kavanaugh had a decent day in court, as his company proved it had reduced its pre-bankruptcy debt by almost 70 percent, from $910 million to $280 million since entering Chapter 11 last July. Counsel did, however, reveal that Spacey and Brunetti’s Trigger Street Productions has yet to be officially absorbed pending finer deal points.

In terms of the studio’s obligations to creditors, lawyers present for various parties seemed surprised at how inconclusive a number of issues were given the late stage of the process — theoretically what should have been the final step.

In testimony Monday afternoon, Kavanaugh adviser and hedge-fund honcho Joseph Nicholas said he had knowledge of more than 50 parties who may be interested in investing in Relativity for amounts ranging from $5 million to $100 million, contingent on the company exiting bankruptcy.

He cited negotiations with one group that were “very far along” for a $50 million investment but said its board wouldn’t allow it to go forward with the bankruptcy ongoing.

“Investors are looking at potential reward versus risk,” said Nicholas.

“People are always doing that,” said U.S. Bankruptcy Court Judge Michael Wiles. “I’m not sure why they are more reluctant about this bankruptcy than they are about others.”

Nicholas has raised nearly $10 billion since 1992 for a variety of companies and said he  was confident the money would come. “It’s going to be a lot of work but I don’t see it as a difficult sell,” he said.

As co-CEO with Kavanaugh, Nicholas will be overseeing the company’s finances, in particular keeping an eye on costs. He said Relativity has already slashed overhead by two-thirds, from about $90 million to $30 million, and that number could still fall.

Court is set to resume Tuesday at 11 a.m. ET.