Relativity Bankruptcy: Planned Court Showdown Over Financing Deal Fizzles

The scheduled battle at U.S. Bankruptcy Court between Relativity Media CEO Ryan Kavanaugh and investment firm VII Peaks didn’t take place today. But while the matter that was on today’s agenda wasn’t raised, it also hasn’t been resolved.

Kavanaugh has charged that VII Peaks reneged on an agreement to kick $30 million into his effort to buy Relativity’s senior debt obligations. Yesterday his team said that they would “continue to seek redress for the resulting harm in the courts.”

When Judge Michael Wiles asked about the matter today, lawyers said that they had nothing to present.

As a result, at today’s session Wiles just postponed until Monday a decision on how to handle Relativity’s debtor in possession loan. The $35 million debt was recently bought by Paul Singer’s hedge fund Elliott Associates.

The revised terms would guarantee Elliott’s Manchester Securities and Heatherden Securities equity warrants and a fee. But Wiles objected to that, saying payments “must be decided in the context of a plan after people have the opportunity to object.”

A lawyer for the hedge fund said that creditors who originally provided the DIP loan received fees. But Wiles said if that was correct, then “it escaped my notice…I understand why Heatherden would want to be paid. I can only do it with an appropriate justifcation.”