Rumored for the last week, Relativity made it official today – the company has filed for Chapter 11 bankruptcy protection. In the last few days, the company has also fired 75 out of 350 full-time employees. While it restructures, Relativity said it still plans to release films like the comedy Masterminds and Halle Berry thriller Kidnap. Sony, meanwhile, has terminated Relativity’s deal for U.S. rights to The Bronze, while Natalie Portman-starrer Jane Got a Gun will no longer be distributed by Relativity. The Weinstein Company is expected to take over distribution of that film.
Here’s the full statement from Relativity:
Relativity Media LLC (“Relativity” or the “Company”) said today that Relativity and certain of its subsidiaries have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York in order to strengthen its balance sheet and recapitalize the Company. Relativity Sports, Relativity EuropaCorp Distribution (the film marketing and distribution joint venture between Relativity and EuropaCorp) and Relativity Education were among those not included in the filing.
The Chapter 11 process will enable Relativity to continue to operate while restructuring its finances, thereby preserving value for its stakeholders.
Relativity also announced that in conjunction with the filing, it is pursuing a sale process for the Company under Section 363 of the Bankruptcy Code. To this end, Relativity has entered into an agreement with RM Bidder LLC, an entity formed and owned by certain of the Company’s prepetition lenders, which will be filed with the Court later today. Under the agreement, RM Bidder LLC will acquire substantially all of the assets of Relativity, subject to Bankruptcy Court approval and certain other conditions including an auction process. RM Bidder LLC’s bid will serve as a starting point for a sale and auction process that will be conducted by Blackstone Group LP and FTI Consulting LLC, led by Dr. Brian G. Kushner the newly appointed Chief Restructuring Officer, and supervised by the Court. This process will be open to other bidders in accordance with auction rules approved by the Court. The auction process is expected to conclude with a sale closing in early October 2015.
In conjunction with the filing, the Company has received a commitment for $45 million in debtor-in-possession (“DIP”) financing provided by a group of the company’s prepetition lenders. Following Court approval, this DIP financing, combined with cash generated by the Company’s ongoing operations, will be available to Relativity to fund the Chapter 11 process.
“Relativity continues to pursue its mission as a next-generation global media company, and we remain firmly committed to our film and television businesses. The actions we are announcing today will protect our valuable franchise and allow us to emerge as a stronger, more focused company,” said Ryan Kavanaugh, CEO of Relativity. “Our board and management team explored a variety of options to refinance Relativity’s debt, and we ultimately determined that the protection afforded by a court-supervised reorganization process will provide additional time and structure to achieve our financial and strategic objectives.”
As part of the reorganization, Relativity is restructuring some of its businesses and 75 full-time positions have been eliminated. In addition, Relativity will wind down M3 Relativity, the Company’s fashion division. None of these organizational changes affect the non-filing entities Relativity Sports, Relativity EuropaCorp Distribution or Relativity Education. These decisions were made after much thought and consideration to successfully reposition the Company for the long term.
“Regrettably, as a result of the need to reduce costs, we have had to make some difficult staffing decisions, which have included job eliminations,” Mr. Kavanaugh continued. “We appreciate the dedication of our employees, whose hard work is critical to our success and the future of our company. We intend to move through the Chapter 11 process as quickly as possible.”
Continued Business Operations
Relativity remains firmly committed to its film and television businesses. As previously announced, the Company plans to release Masterminds and Kidnap. In its television business, Limitless, which is based on the Relativity movie starring Bradley Cooper, is slated to debut on CBS’ primetime lineup this fall. Relativity continues to leverage its MTV ratings hit Catfish by developing a number of international versions of the show, as well as a planned sequel called Truce, which is currently in production. Relativity will continue to move forward with a robust production slate of scripted and non-scripted shows during the Company’s reorganization process. Ryan Kavanaugh continues to serve as CEO and Chairman of the Board, and Relativity’s senior core executive team remains in place.
Relativity will continue its business operations as the Company completes its restructuring. The Company has filed a variety of customary first day motions with the Bankruptcy Court to request, among other things, the authority to continue to pay employee wages, salaries and benefits.