Manchester Securities Asks Court To Postpone Relativity Bankruptcy Hearing

The lender wants U.S. Bankruptcy Court Judge Michael Wiles to delay to this Friday a key hearing scheduled for tomorrow. It says in an “emergency motion” this morning that Relativity “flagrantly violated” court rules by waiting until late this past Friday to introduce “two key pieces of evidence.” They include a valuation of the company filed under seal.

“In addition to the substantial distraction of having to process new and conflicting information just three days before trial, this ‘trial by ambush’ has deprived Manchester of key evidence,” its filing says. The lender adds that it is waiting for other information about Relativity’s valuation and marketing, as well as a deposition of CEO Ryan Kavanaugh.

Manchester — which calls itself “the largest single creditor in these cases with the most at stake” — believes Kavanaugh’s deposition “will contradict” a valuation from Bradley Sharp submitted on Friday. The CEO “has taken the position that he could not be expected to sit for a deposition on such short notice, even though Manchester offered to take his deposition anywhere in the Los Angeles area and even over the weekend,” Manchester says. A delay in the case to Friday “should alleviate his concern.”

At the hearing scheduled for tomorrow the court is poised to approve the next payment to Relativity from a $45 million debtor-in-possession financing plan. In connection with that, Wiles is weighing a proposed plan and calendar to auction the company.

A lending group known as Stalking Horse Bidders has offered to pay $250 million, but wants to move quickly to be sure that Relativity’s productions aren’t interrupted, and to keep legal and other costs low. But  Manchester and other creditors say the proposed process moves so quickly that their interests may be lost in the shuffle, and might not give rival bidders enough time to step up.

Manchester says that the valuation information that Relativity privately submitted this past Friday came as a surprise: the studio had “never tendered” Sharp as a witness in the case.

“Manchester should not be forced to bear the consequences — including the substantial distraction of even having to take a valuation deposition the day before trial, let alone evaluating Mr. Sharp’s testimony in consultation with its financial advisor — just because [Relativity] chose to wait until their reply brief to first introduce evidence on an issue for which they bear the burden of proof,” the filing says.

This article was printed from