Relativity Bankruptcy Judge To Hear RKA Film Financing Complaints On Thursday

Relativity’s most vocal critic in its effort to emerge from Chapter 11 bankruptcy protection will get a separate day in court later this week. RKA Film Financing wants U.S. Bankruptcy Court Judge Michael Wiles to let it go in to Relativity and seize unreleased films used as collateral for unpaid loans. The hearing on this and other requests will take place Thursday morning, according to a court filing this morning. Objections must be filed by tomorrow afternoon.

RKA has separately sued Relativity CEO Ryan Kavanaugh and other officers for fraud saying that they used most of its $85 million in loans to prop up the company’s balance sheet — not for its intended purpose: to buy ads for several still unreleased films.

RKA says that Relativity still owes at least $28.7 million on the P&A loan for Masterminds, $15.0 million for Kidnap, $21.4 million for Somnia, $18.7 million for Disappointments Room, and $1.3 million for Lazarus.

RKA fears that the films, the collateral for its loans, will be mixed with other assets in a sale. Relativity’s “lack of concern” over the group’s claims on the films “has become a consistent pattern,” it told the court. RKA wants Wiles to let them go in and take three films so RKA can license them to another distributor. The group also wants the judge to order Relativity to account for how the cash RKA loaned has been used.

Relativity has not formally responded to RKA’s Bankruptcy Court claims, and declined to comment on this week’s hearing.

Last week, Wiles approved Relativity’s motion to accept $2.5 million in interim financing and to delay by two weeks its proposed calendar to resolve disputes and conduct a sale. Relativity said that it’s privately negotiating with creditors to resolve their concerns about the process leading up to a sale.

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