Relativity Reorganization Delayed Again by Bankruptcy Judge

Judge Michael Wiles notes “opaque” last-minute filings from Ryan Kavanaugh and his new investors

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A U.S. Bankruptcy Court judge has once again delayed the sale of Relativity Media’s remaining assets — but if all goes as planned, the company will emerge minus a half billion dollars in debt currently on its balance sheet, attorneys for the studio said Thursday.

The debt would be converted to equity or otherwise disappeared, said Jones Day attorney Bennett Spiegel, as Relativity closed an overall deal to sell itself to an investor group led by CEO Ryan Kavanaugh.

Spiegel said that, in conjunction with the broader deal, a DIP (debtor-in-possession) loan, one of the moving parts key to resolving the bankruptcy process, has been reduced to $17.5 million from $30 million.

Relativity had hoped Judge Michael Wiles would approve an order to amend the DIP, but instead he complained the was filing “unwieldy” and “opaque” on Thursday, asking for a rewrite.

Relativity, perhaps, was not expecting another continuance judging by a press release late Wednesday that heralded the “complete” acquisition of everything but their TV division –which was successfully sold to a group of senior lenders for $125 million.

Lawyers agreed to an updated filing and another go at the DIP, with court back in session on Tuesday.