This morning’s U.S. Bankruptcy Court hearing wasn’t exciting — but it swept away some of the issues Relativity Media needed to resolve as it plans for a sale to take it out of Chapter 11 bankruptcy protection.
The studio said that it privately reached an agreement with creditor Macquarie Investments to re-word the terms governing handling of so-called “de minimis” assets — typically non-strategic properties worth less than $1.5 million.
The firm had complained that Relativity’s sale plan was too vague and that “could have a significant impact upon the sale price.” Macquarie said last month that it was owed about $32.9 million for loans to promote The Woman In Black 2: Angel Of Death, The Lazarus Effect, and Beyond The Lights.
In addition, Judge Michael Wiles agreed to Relativity’s requests to make undisclosed payments to TV producers Brian Lando, and The Jay and Tony Show run by Jay Blumenfield and Tony Marsh.
“The big issue here that we’ve got to get resolved is to be sure the producer continues to work on critical projects,” Relativity lawyer Craig Wolfe told the court. The company wants to pay them half of an amount they’re owed now, with the remainder after October 5 when the court is expected to approve a sale agreement. Five other producers agreed to wait until after a sale for their payments.
He said the amounts to Lando, Blumenfield and Marsh must remain secret due to “the extremely sensitive, private nature” of the agreements “in a very competitive market.” A group of creditors known as Stalking Horse Bidders have offered $250 million for Relativity, and agreed to the terms of the agreement if it prevails in an auction.
Wiles agreed — but asked for a private document specifying the payment amounts. He added that a proposed order should note that “if you don’t get continued performance [from the producers], the court reserves the right to rescind” the payments.
The judge also insisted on stricter terms for Relativity’s contract hiring FTI Consulting to be its crisis and turnaround manager — with Brian Kushner serving as Chief Restructuring Officer.
Wiles said the agreement had to take out what he called “a highly unusual provision” that requires the CRO to approve all expenditures. The judge said the CRO should not have “veto power over a board of directors.”
He also wanted a provision taken out that would require Relativity to make special payments to FTI if any of its employees become officers of the studio. “I’ve never seen such a thing,” the judge said.
Bids for Relativity are due on September 25, ahead of an October 1 auction. If things go as planned, the sale could close on October 20.