Today’s the deadline for objections to Relativity Media’s plan to emerge from Chapter 11 bankruptcy protection. And filings are flooding in to the U.S. Bankruptcy Court from those who want to influence Judge Michael Wiles ahead of his February 1 hearing to rule on the matter.
Netflix, Discovery, Paramount and RatPac Entertainment are among the companies registering complaints.
The one from Netflix seems to have struck a nerve: It says that while it “would like to be supportive of the Debtors’ efforts to reorganize,” it wants out of a deal that’s been lucrative for the studio.
The streaming power wants “substantially more assurance” that Relativity will be able to make good on its commitment to provide a certain number of films per year — the exact number is redacted.
Indeed, Relativity CEO Ryan Kavanaugh and his backers have “failed to demonstrate that they have even the funding projected as necessary to exit bankruptcy,” Netflix says. “The Debtors’ own projections show some $160 million in new equity and debt for which the Debtors have yet to identify a source.”
Losing a Netflix deal would be a blow to Relativity, which just appointed Dana Brunetti and Kevin Spacey to run the film studio after it emerges from Chapter 11. The pair’s Trigger Street is behind one of Netflix’s most important successes: House Of Cards, which on March 4 returns for its fourth season.
The streaming video power notes, in its filing, that Relativity has “not filed anything with the Court amending or supplementing the Plan to address the transactions with Trigger Street or Spacey and Brunetti, or otherwise disclosing any such transactions. This leaves it unclear whether the transactions with Trigger Street, Mr. Spacey, and Mr. Brunetti have even been finalized, despite the Debtor reporting them as a done deal.”
In response, the studio says that in 2012 it “signed a distribution deal with Netflix whose terms were by far the most favorable of any studio. This objection is nothing more than a blatant attempt by Netflix to use the chapter 11 process to once again renegotiate the agreement, which does not expire until 2018.”
Many of the other complaints echo Netflix’s warning that Relativity might not have the resources to fulfill its agreements.
For example, the Directors Guild of America, Screen Actors Guild – American Federation of Television and Radio Artists, and Writers Guild of America, West question the studio’s ability to live up to health care and pension commitments:
Relativity has “not yet shown that requisite exit financing and equity investment will be in place, which could severely affect the feasibility – and ultimate confirmability – of the Proposed Plan.
Brett Ratner and his Rat Entertainment are concerned about a Relativity filing that seems to indicate that it won’t compensate them for their first opportunity rights to the TV series based on the movie Catfish:
The proper cure amount … is at least $650,000, plus an ongoing 10% gross participation in the revenues generated from the continuing exploitation of the existing episodes of Catfish, which Ratner believes number approximately 65 episodes in total.
Although Relativity wants to produce TV shows, Discovery wants the court to make it clear that it no longer has a TV deal with the studio now that it sold the television production unit to creditors.
Discovery has no choice but to object to the Plan, in order to compel the Debtors to clarify their intent with respect to the Discovery Agreements … Discovery has sought to clarify such treatment by contacting the Debtors (through counsel) informally, but to date has not received a substantive response.
Investment management firm VII Peaks says Relativity still has too many balls in the air to give anyone confidence about its ability to operate without court supervision:
As there is a seemingly endless stream of discussions and revisions to the Plan, what is/will be actually presented to the Court and proposed for confirmation on February 1, 2016 is not at all clear at this point and the VII Peaks Entities reserve the right to supplement their objections to confirmation as further revisions and amendments to the Plan surface….
[Missing information includes] the identities and expected compensation of post-confirmation directors and officers, Ryan Kavanaugh and [investor] Joseph Nicholas cannot be found anywhere in the Plan or Disclosure Statement. It is equally unclear what equity interest Ryan Kavanaugh and Joseph Nicholas will hold post-confirmation and what consideration they actually paid for such interest.