Relativity’s Ryan Kavanaugh Calls RKA Lawsuit Claims ‘Frivolous,’ ‘Ridiculous’

CEO says P&A vendor is exploiting company’s financial troubles to “squeeze the $10 million I invested out of my pocket”

Last Updated: July 15, 2015 @ 11:34 PM

Relativity Media CEO Ryan Kavanaugh has responded to a lawsuit visited on him and one of his holding companies Wednesday by RKA Film Financing, a P&A vendor in which the executive has a 10 percent stake.

Filed in the New York State Supreme Court, the complaint says Kavanaugh and his subsidiary River Birch Fund failed to pay $7.5 million allotted for the promotion of Relativity Media films.

In light of the default on payment, which the filing says was due June 29, RKA is asking Kavanaugh to forfeit his equity ownership stake in RKA.

“This lawsuit is ridiculous. I invested $10 million of my own capital into RKA, the entity that is suing me. My $10 million investment is the riskiest part of the capital structure and is subordinate to other capital. There is no default on the loan or facility and there has been no improper use of loan proceeds,” Kavanaugh said in a statement late Wednesday night.

“This is nothing more than other investors trying to take advantage of Relativity’s current restructuring being delayed and market noise to squeeze the $10 million I invested out of my pocket and into theirs. Unfortunately, the other investors involved, who have no claims, have gone so far as to threaten the company and sue others, and use threats of a lawsuit as fraud so that I will write them a check,” he said.

Reps for RKA and its legal counsel did not immediately return TheWrap’s request for comment.

Kavanaugh is unfazed by any potential response. “Neither I nor the company are worried about these frivolous claims from RKA. I will not be making any payment to RKA, especially considering that I have invested $70 million in Relativity over the past two years,” he concluded.

Relativity is currently facing a public fight for its life. The embattled indie film distributor is attempting to satisfy nearly $150 million in senior secured debt, TheWrap reported last week, on top of squabbling with subordinated debt holders and attempting to find equity investors to finance ongoing and new film projects.

The Toronto-based firm Catalyst Capital agreed to absorb the $150 million in debt, an individual with knowledge of the deal told TheWrap.

But despite reports last week that Catalyst would also infuse Relativity with an additional $170 million in cash for a long-term recapitalization strategy, the individual said that no equity was involved and that Kavanaugh was afforded 10 days to secure an equity investor for upcoming projects.