Should Relativity be allowed to pay about $8.3 million for residuals and participations while it’s seeking bankruptcy protection? No, or at least not yet, creditors Manchester Securities and Heatherden Securities argue in among filings today ahead of next week’s scheduled U.S. Bankruptcy Court hearing about the studio’s sale plans.
The lenders say that a payment now “might improperly elevate” some creditors over others even as the court tries to determine who stands where in the lineup of entities seeing repayment.
What’s more, the filing says that the outlays would be unusual — and aren’t essential. In “numeous entertainment bankruptcy cases” companies “never sought relief to pay prepetition participations and residuals, let alone at the outset of the case and prior to rejecting or assuming contracts.”
MGM was an exception in 2011. But it had a prepackaged bankruptcy and “sought and obtained an order” authorizing the payments. RHI Entertainment also asked for payment rights in its prepackaged bankruptcy in 2011 “but not as part of their first day relief, but rather nearly four and a half months later.”
Manchester and Heatherden say Relativity hasn’t met its burden of proof under the “doctrine of necessity” to justify making payments now. Specifically, the filing says that Relativity hasn’t shown that guilds or talent in its productions will stop working without payment, or that they “would not be satisfied” with a promise of payment.
Relativity Deadlines Pushed Back Two Weeks, Gets $2.5M In Interim Financing
The lenders say that they’re “optimistic” that they’ll “reach a compromise” with Relativity before the hearing Tuesday, but want to be ready in case the talks don’t bear fruit.
Watch on Deadline
Among the other filings posted today include the addition of Pernod Ricard USA Llc and The Absolut Company AB to companies requesting service of papers in the bankruptcy suit, in connection with Relativity Fashion Llc.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.