Relativity Objects To Paying Bankruptcy Consultant

Relativity Media said today that its Official Committee of Unsecured Creditors plans to file an objection in U.S. Bankruptcy Court over the fees FTI Consulting says it is due for its work on the studio’s Chapter 11 process.

The filing could come as early as tomorrow, we hear.

FTI said in a filing last month that Relativity owed $4.58 million in fees and $251,504 for expenses to cover the firm’s work from the end of July — when the studio filed for Chapter 11 protection — to the end of September.

Relativity cited an investigation by a special committee of its board of directors, which is still looking at the matter, as reasons for the objection.

But the company says that FTI made several business decisions without consulting Relativity directors. They include passing on an offer to sell the company’s fashion division as well as various employment decisions.

A hearing on the confirmation of Relativity’s reorganization plan is scheduled for February 1. Waiting on the other side is incoming studio chairman Kevin Spacey and president Dana Brunetti after chairman and CEO Ryan Kavanaugh’s company acquired the pair’s Trigger Street production company. Deadline broke that deal last night.

“From the very beginning of Relativity’s reorganization, the Committee has been a strong supporter of Relativity’s efforts to reorganize, watching our back to ensure that no party could be successful in pursuing actions that would threaten the company, and I am deeply grateful for their ongoing support,” said Kavanaugh. “We look forward to continuing to work with the Committee to emerge from Chapter 11 on a timely basis and not allowing any party to utilize the bankruptcy process to leverage the company for their own benefit.”

His statement contradicts a charge last month by FTI’s Brian Kushner, formerly Relativity’s Chief Restructuring Officer, who told the Court that it’s “no secret that Mr. Kavanaugh did not want to hire an outside firm” to manage its affairs.

“Mr. Kavanaugh stated to me on several occasions during the pre-petition period of Summer 2015 that he did not want nor would he even consider the Debtors’ filing for bankruptcy and/or selling its assets,” Kushner said. “Rather, Mr. Kavanaugh worked, unsuccessfully, to raise sufficient financing mainly through equity investments while the liquidity position of the Debtors deteriorated.”

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