EXCLUSIVE: If you thought the Chapter 11 of Ryan Kavanaugh’s mini-studio was going to go smoothly towards auction as proposed on July 30, Sumner Redstone’s crew have news today for you. So do Reed Hastings and Ted Sarandos. In bed with Relativity on a “multitude of contracted relationships,” Viacom is not happy nor feeling very secure with how fast things are moving and the direction they seem to be headed – not happy at all. In anticipation of a second Debtor in Possession financing hearing on Friday, they took those concerns to court Wednesday as Netflix did too.
“While Viacom does not object to Relativity’s decision to sell its assets, Viacom does object to the proposed procedures insofar as they prejudice Viacom’s rights under its various contracts with Relativity,” said lawyers for the media giant in one of several filings Wednesday in federal court (read it here). “Relativity’s motion papers give either no information or only the sketchiest of information about which of Viacom’s contracts will be affected by the proposed sale.” The 5-page response from Viacom also adds that “this lack of detail has made it impossible for Viacom to determine what position to take with respect to its contracts and the proposed sale, and Viacom accordingly reserves its right to supplement this objection as it obtains more information from Relativity.” And to make sure you know they mean business, Viacom adds that it “also reserves its right to object to the proposed Sale Order at the appropriate time.”
Viacom notes that among its contracts with Relativity include the Catfish TV Series, currently shown on MTV. This is a surprising one because while Relativity TV is formally part of the Chapter 11, it has pretty much been out of the mix the last week. Viacom’s move indicates a shift for that actually profitable unit. Other agreements the company notes in its Wednesday court filings related to the presently stunted comedy Masterminds, a project called Fighter and the “project referred to as the United RelativityREAL Project.
With that hearing coming up on Friday to sign off on a second installment of a $10.5 million loan to Relativity in DIP financings, Viacom also wants the process slowed down until their place in the pecking order of the whole convoluted situation is determined – at least for the time being and seemingly how much leverage they can get out of it. “Viacom hereby objects to the proposed Interim Order to the extent that the Debtors propose to grant the DIP Agent a senior security interest in any assets that are subject to Viacom’s liens or security interests,” says another filing by the company today (read it here).
Viacom isn’t the only one today who wants Judge Michael Wiles to hear their pleas. Netflix on Wednesday also filed a motion to make sure that it is assured delivery of projects it has with Relativity. The streaming service has a deal with Relativity that goes until 2018 and they want the sales process eased off so there is enough time to assess if a new owner of the company’s assets and obligations can actually meet them. “Netflix is confident that the bidding procedures can be modified so as to allow executory contract parties to appropriately evaluate and respond to the proposed assumption and assignment of their contracts without unduly interfering with the Debtors’ overall sale process,” says the streaming service today (read it here).
One of two films that Netflix says it has received from Relativity is the Nicolas Cage starrer Left Behind, which was released in theaters last October. The producers of the faith based film also filed paperwork today over the more than $1.8 million in license fees that Ollawood Productions and Left Behind Investments say they are owed from Relativity from payments the company has received this year from Netflix. Relativity say that money has been frozen because of the Chapter 11, LBI say they want to make sure they get it.
In its second day of filings in the case, RKA Film Financing wants the U.S. Bankruptcy Court to rule that it can go to the head of the line of lenders looking to be reimbursed from several of Relativity’s unreleased films. RKA provided some $85 million specifically to promote the films — each of which was set up as a separate corporate entity. The company, which is locked in litigation with Kavanaugh over alleged misuse of P&A funds, also wants the judge to make this clear on Friday in a hearing to determine whether Relativity should receive $10.5 million, the second installment in its Debtor In Possession financing. Relativity is “not directing a single dollar from the DIP Facility to the release or for the benefit” of the films, RKA’s motion today says.
The flood of filings today came just before a deadline on Friday’s scheduled hearing.
Variety was first to report the news of Netflix’s filing today.