UPDATED, with additional filing: Relativity Media has resolved six of 15 major objections to its bankruptcy financing plans, it says in a court filing today. But U.S. Bankruptcy Court Judge Michael Wiles still might have his hands full at a hearing Tuesday sorting through remaining differences with creditors including Netflix, Select Music, Macquarie Investments, Viacom, CIT Bank and RKA Film Financing.
The studio wants Wiles to approve the next installment of the $45 million in debtor-in-possession financing that lenders have offered to keep it going. Other creditors want the judge to deal first with their complaints about the pace or particulars of Relativity’s proposed auction process.
Relativity warns that if the loan does not come through, then it “will be unable to continue uninterrupted operations and will be unable to retain many of [its] invaluable relationships with industry talent, vendors and suppliers, and personnel.” That would “significantly lower the value of the Debtors’ business as a going concern and would lead to a bargain-basement liquidation.”
The company adds that its “only motivation” is to “maximize the value of their estates for the benefit of all constituencies” — unlike those objecting who “may seek to gain leverage in this process.”
Relativity still has issues with its most vigorous critic — RKA Film Financing — but says it has an agreement to deal with its complaint that the sale calendar moves too fast. The proposed timetable calls for bids to come in by September 25 ahead of an auction on October 1, and a sale agreement that could close on October 20.
The studio also is “hopeful that language will be added” to the final DIP Order to deal with RKA’s concern that other creditors might lay claim to several unreleased films it says were used as collateral for loans earmarked for ads. RKA wants to seize the films, alleging that the cash largely was misused to prop up the studio’s balance sheet.
The two sides still differ over whether RKA deserves special “derivative standing” to pursue its claims in the bankruptcy case. RKA “has not cited any authority with regards to its request to be granted derivative standing, let alone authority that it should be granted such standing to assert estate claims absent being an estate representative or fiduciary,” Relativity says.
On other matters, the company says that it has resolved Viacom’s complaint that the sale plan was too vague about the entertainment giant’s liens.
But there’s no deal yet with unsecured creditors who say that the sale process moves too quickly. There’s also no deal yet with Netflix, which fears that Relativity will fail to meet its obligation to supply its “yearly minimum of films in 2015.”
In a separate filing, Relativity fires back at Manchester Securities, which has complained that the sale calendar moves too fast. The lenders hope to “derail and completely stop [Relativity’s] financing and sales process,” the studio says.
Manchester’s arguments “contain legal and factual flaws,” it adds, and aim to “transform unsubstantiated legal theories into sustainable ones merely by repeating them. … While Manchester, an unsecured creditor, is quick to criticize the Debtors’ proposed pathway, it has not offered a feasible alternative.”