UPDATE with Relativity statement: What was expected to be a day-long slog through complicated bankruptcy proposals and objections ended quickly in New York this morning: U.S. Bankruptcy Court Judge Michael Wiles approved Relativity’s motion to accept $2.5 million in interim financing, instead of the planned $10.5 million, and to delay by two weeks the schedule to resolve disputes and conduct a sale.
There’ve been “a flurry of negotiations since Wednesday,” Relativity attorney Richard Wynne of Jones Day says. The studio can take less cash for now because it’s “doing better financially since the first hearing” two weeks ago. The next hearing will take place on August 25, as scheduled.
“During Relativity’s hearing today, the Court orally approved an extension of the company’s interim DIP loan in the amount of $2.5 million, reflecting the funds required to maintain a stable cash position and business operations until after the final DIP loan hearing on August 25, 2015,” Relativity’s chief restructuring officer Brian Kushner said in a statement after the hearing. “In advance of that hearing, Relativity and its advisors will work to resolve the objections raised prior to today’s hearing. Relativity, along with certain lenders who are serving as the Stalking Horse Bidder, proposed to the Court a revised sale timeline.”
The revised sale plan calls for bids to come in by September 25 ahead of notification of qualified bids by September 28, an auction on October 1, a proposed hearing to consider approval of the sale on October 5 and potential closing on October 20.
Wiles called the new plan “a constructive step” adding that he applauds the parties “for attempting to work out their differences.”
Some of Relativity’s lenders, referred to in court documents as Stalking Horse Bidders, have offered $250 million for its movie and TV assets. They’d like to move quickly to keep productions moving along, and avoid wracking up legal expenses. But others who are owed money say the offer is a low-ball price and want to take more time. Some say that it’s still not clear how much each is owed or what assets and liabilities would be included in a sale, They also say that, with time, Relativity might attract a higher bid.
All of the objections remain alive, at least as far as the court is concerned, during the behind-the-scenes talks to resolve them. Talks include potential changes in the proposed deal with Stalking Horse.
“It’s a balancing issue for us for the business to not lose any value,” Wynne says.
A lawyer for one of the creditors, Manchester Partners, asked the judge to insist that Relativity be more responsive in providing information about its use of funds — and minutes of the board meeting leading to the proposed deal with Stalking Horse.
“We’re the largest single creditor,” he said, adding that “if the process doesn’t go properly, we’ll become the largest single unsecured creditor.”
Relativity lawyers said that they had already promised to provide the information, which seemed to satisfy Wiles.
The court was to decide today whether to approve a $10.5 million loan to keep Relativity going. It’s the second installment in a $45 million Debtor In Possession financing plan from current lenders following the $9.5 million first installment that Wiles approved two weeks ago.
There are at least 16 motions or objections to Relativity’s proposed plan, which included a calendar requiring anyone interested in buying the film and TV company to identify itself by September 3 and submit a bid by noon on September 11, ahead of an auction on September 16. Those dates have all been extended by two weeks.