Ryan Kavanaugh’s Relativity Media Hits Snag in Bankruptcy Refinancing

CEO and consortium of investors modify financial plan for bankrupt assets following sale of TV division

Last Updated: October 20, 2015 @ 1:25 PM

A Tuesday hearing in U.S. Bankruptcy Court showed smooth sailing for the sale of Relativity TV, but a speed bump for Ryan Kavanaugh‘s bid for the rest of his company’s assets.

Kavanaugh and a consortium of new investors have modified a plan to raise $60 million in cash and absorb $30 million in debt for Relativity Studios and other non-TV divisions included in Chapter 11 filings.

In court, the group proposed a new plan to raise $30 million in cash with a $60 million debt acquisition to address an outstanding $125 million loan — suggesting that Kavanaugh might not have been able to raise as much cash as he had initially hoped.

“While the financial structure of the transaction has changed, we anticipate the Court to ratify this in the next 48 to 72 hours,” a Relativity spokesperson said in a statement. “Relativity anticipates that it will emerge with all of its pre-chapter 11 assets and operating businesses, having sold the unscripted television business only, with almost 90 percent of its debt off of its balance sheet.”

In a memo to his staff following the hearing, Kavanaugh quashed rumors that he’d sold the company’s interest in Relativity Sports — and that longtime investor Ron Burkle would be helping to amp up the athletic division (read the full email below).

Kavanaugh and his new consortium are also still working on finalizing an amendment to its $35 million DIP (debtor-in-possession) financing, the funds it needs to maintain ongoing operations at the nine-year-old company. It appears Relativity won’t need as much new capital, as had been expected, and lawyers said the terms of the new DIP loan will be less restrictive and better for the company.

In addition, U.S. Bankruptcy Court Judge Michael Wiles resolved virtually all of the objections to the sale of Relativity’s TV division for $125 million to a group of investors led by Anchorage Capital, Luxor Capital and Falcon Investment Advisors.

That sale is expected to close later today, with the new owners reinvesting and renaming the company — whose projects include CBS’ “Limitless” and MTV’s “Catfish.” (Kavanaugh’s Relativity will retain a financial stake in some scripted series, including “Limitless.”)

Read Kavanaugh’s full email to staff:

Dear Colleagues,

I wanted to share an update with you on an important milestone we’ve achieved toward the company’s emergence from chapter 11 with a significantly strengthened balance sheet. Today, we closed transactions to sell the television division for $125 million. Additionally, as Chairman and CEO, I have led an investor group to acquire the rest of the company, which got preliminary approval, and should be ratified by the Court in the next 48 hours.

This simply means that we anticipate that we will emerge from chapter 11 with all of our assets and operating businesses (we sold only the unscripted television business), with 90 percent reduction of debt.

In the near future, Relativity will file a plan of reorganization with the Court that will detail the company’s capital structure and its strategy for long-term growth with film, digital, music, sports and branded entertainment, continuing to build its asset base to offer brands unique access to a fully integrated 360 degree content engine. There was also a rumor that we sold our ownership in Relativity Sports. That is false. We hold the same amount today as we did prior to the process, and continue to be excited about all of our businesses. It is our intent to work closely with Ron Burkle and get much more active in integrating sports into our day to day business, which Colbeck did not enable us to do prior to the chapter filing.

I want to personally thank you again for your continued focus, dedication and loyalty throughout this process. I’ll continue to keep you updated.

We have some very exciting events coming.

Best,
Ryan

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