Relativity Bankruptcy: Bids Are In, What Happens Next?

Bids were submitted on Friday; details expected at the next bankruptcy court hearing on Monday

With bids due on Friday for the assets of bankrupt Relativity Media, the future of Ryan Kavanaugh‘s company remains up in the air. There are literally hundreds of different scenarios in play, according to experts who anticipate competitive bidding for at least some of the studio’s divisions.

A group of Relativity’s lawyers, bankers and accountants is expected to hunker down this weekend to sort out the bids before the company must go before U.S. Bankruptcy Court Judge Michael Wiles on Monday for the next hearing, where it’s possible that bidders could be disclosed unless the studio successfully pushes for a delay.

It remains unknown whether a single buyer will purchase all of Relativity’s assets or if the company’s various divisions will be sold to multiple buyers.

As TheWrap reported Tuesday, the company expects more than 25 bids — the vast majority for Tom Forman’s TV unit, which has successfully generated hits like MTV’s “Catfish: The TV Show” and CBS’ new drama “Limitless.” The unit is expected to draw offers in the $100 million range, close to its revenues for 2014.

But none of the submissions is expected to approach the $250 million stalking-horse bid offered by a group of senior lenders — led by Anchorage Capital, Falcon Investments and Luxor Capital — for all of the company’s assets. Without competing bids for the whole company, the resolution could be complicated.

One scenario involves a mini-auction, in which Relativity would narrow down a list of suitors and begin negotiating with each, according to Steven Gubner, managing partner at the law firm Ezra Brutzkus Gubner who has been closely monitoring the Relativity sale.

It’s also possible that someone could buy out the lead investors’ stake in Relativity for roughly 90 cents on the dollar, Gubner said. Bids may include cash and non-cash assets, such as a lease, in which case the buyer would typically ask for a discount.

Relativity may also ask for more time to evaluate bidders and vet potential buyers, especially those from overseas, whose financial qualifications may be less clear, Gubner told TheWrap

The investors who hold large stakes in Relativity are eager to see a sale come to fruition quickly, as it’s costing them a small fortune to keep the company’s doors open while most business has come to a standstill.

Their agenda is to maximize value, as investors and banks typically aren’t interested in underwriting a movie star’s residual payments or to pay out advertising contracts. That said, investors could also choose to carry debt for a creditable buyer, accruing millions of dollars in interest over the next six to 12 months.

There’s also intrinsic value to Relativity’s operational talent, and several employees are believed to have golden parachutes built into their contracts, which can be acquired as individual assets.

Bids submitted in secret on Friday, though as with any bankruptcy scenario, it’s possible that details could leak sooner.

Even after the sale is completed, which is likely to happen sometime next month, the scores of Relativity creditors are likely to continue their litigation to jockey for payment — especially given the long odds against full compensation.

At the time of the company’s Chapter 11 filing on July 30, Relativity reported $560 million in assets and nearly $1.2 billion in liabilities.

“Committees and other creditors will still pursue the money they’re owed,” Robbin Itkin, business and entertainment restructuring partner at law firm Liner LLC, told TheWrap. “How it got to this point is the question, and why — there’s so much debt and the inability to pay it.”

Matt Donnelly contributed to this report.

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