In the second bankruptcy hearing for Ryan Kavanaugh’s Relativity Media on Tuesday, U.S. Bankruptcy Court Judge Michael Wiles approved motions to pay key vendors and to prioritize residuals and other payments to creative unions like the Screen Actors and Directors Guilds.
The ruling came after Relativity privately resolved objections filed by an early investor, Manchester Securities that was “highly negotiated over several rounds,” according to studio attorney Craig Wolf, with Manchester eventually withdrawing the claim. Wolf said his clients expected a “draw down” between $300,000 -$600,000 following the negotiation.
Manchester, a subsidiary of the hedge fund Elliott Management, initially didn’t understand the “perceived necessity” of Relativity settling up past-due payments and future residuals to actors, directors and writers. Relativity argued that it had to be in good standing with the guilds to ensure ongoing TV and film production, including the fall CBS series “Limitless.”
The resolution over guild payments shouldn’t suggest harmony when it comes to Manchester. An attorney for a group of senior lenders attempting a $250 million stalking-horse bid for Relativity took shots at Manchester, one of the earliest investors in the studio.
“Once we’re here in bankruptcy, we need to maximize value,” said Mark Shinderman of Milbank, Tweed, Hadley & McCloy. Shinderman represents the stalking-horse group, RM Bidder LLC, which is comprised of Anchorage Capital, Falcon Investments and Luxor Capital.
Manchester’s qualms were described as “schizophrenia” by Shinderman — given that one of Manchester’s own affiliates, Heatherden Securities, owns 30 percent of the studio.
Shinderman called Manchester’s legal maneuvers a “pursuit of leverage by someone wearing multiple hats. Are they shareholder? A secured creditor? An unsecured creditor?”
Tuesday’s hearing was originally slated for August 14. U.S. Bankruptcy Court Judge Michael Wiles adjourned the hearing after a deluge objections from Relativity’s unsecured creditors demanding more time to assess the true value of the company.
The one offer currently on the table is a $250 million stalking-horse bid for Relativity’s assets from a group of senior lenders — Anchorage Capital, Falcon Strategic Investments and Luxor Capital — that are owed roughly $361 million.
Should Wiles allow the sale to proceed as proposed, it would close quickly. But several creditors have objected that a quick sale would prevent from other bidders from entering the process and potentially increasing the sale price, leaving less money for unsecured creditors and other interested parties to recoup their losses. The company’s total debt is at least $681 million.
During the 11-day delay, Relativity was confident it had resolved the majority of the objections, though its unclear if arrangements made to satisfy the claims were monetary or not.