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Relativity Media sale could attract rival Hollywood moguls and far-flung billionaires
By RYAN FAUGHNDER TIMES STAFF WRITER
elativity Media is for sale, but who's buying? Rival Holly- R wood moguls and far-flung billionaires are expected to take a peek at Ryan Kavanaugh's battered movie and TV studio as it goes on to the auction table. Kavanaugh tried to shake up Holly- wood with bold claims that he could re- duce the risk of making films by focusing on smaller pictures and using mathemati- cal techniques to avoid ruinous flops. He made a name for himself among the mov- ie business establishment by co-financing winners such as "The Social Network" Ryan Kavanaugh has been actively meeting with potential investors regarding a bid, and "Bridesmaids." according to a person familiar with his thinking. (Paul A. Hebert/Invision/AP) But a string of box-office failures and mounting debt have driven the studio to Bankruptcy Court, kicking off what's sure ven." No one has publicly made a pass at will hold the keys to the Beverly Hills to be a closely watched quest for buyers. Relativity yet, and the company declined company when the auction is over. Relativity is hoping for multiple play- to comment for this story. "I think there will be a buyer, but I ers to explore bids on all or part the en- Court documents filed last week in New don't think it's going to be pretty," said tertainment company that filed for Chap- York revealed a studio with its back Lloyd Greif, chief executive of Los Ange- ter 11 bankruptcy protection last week against a wall. les investment banking firm Greif & Co. after failing to pay down $320 million in The filings listed the company's total "This is not an easy business to get your debt. liabilities at $1.18 billion at the end of last hands around in an accelerated time One leading theory is that competitor year, more than double the $560-million frame. You want to know what you're Metro-Goldwyn-Mayer will consider book value of its assets. A group of senior getting." buying the 11-year-old venture. But there lenders, which will be the first in line to MGM, the studio behind the James are others who may be poised to kick the get its money back, is owed $361 million, Bond franchise and "The Hobbit" movies tires, including private equity titans, for- according to filings. And then there are directed by Peter Jackson, is part-owned eign business magnates and digital media those who are least likely to get paid — by Anchorage Capital Group, a New York companies. Even Kavanaugh himself is Relativity's long list of unsecured credi- hedge fund that holds a large chunk of said to be readying a play. tors that includes Hollywood production Relativity's senior debt. Analysts said Analysts, bankers and film studio companies, film marketing firms and Anchorage could help combine Relativity insiders have expressed doubts about the technology giants. with MGM, which emerged from its own value of the firm, whose few hits include But Relativity's difficulties haven't Chapter 11 bankruptcy in 2010. "Limitless," "Immortals" and "Safe Ha- stopped Tinseltown from guessing who Anchorage and MGM declined to And things could get worse for Rela- Through a spokesman, Sonar declined to comment. tivity if the process drags on longer than comment. Relativity's small TV unit could be expected. Others who could play a part include attractive to a larger studio, especially one "The longer these things sit around, private-equity billionaire Alec Gores and with a tenuous foothold in the television the more they devalue," said bankruptcy Platinum Equity chief Tom Gores, ac- industry, experts said. lawyer Steve Gubner of the Woodland cording to some analysts. Kavanaugh's TV division consists Hills firm Ezra Brutzkus Gubner. There's also a chance that an outside mostly of reality TV programming such Others expected to consider a bid for company or billionaire could swoop in. as MTV's "Catfish," which has limited Relativity are not traditional film industry One person reportedly interested is Carlos appeal to buyers because of the lack of players but have made key investments in Slim, the Mexican mogul who according demand for syndicated reruns. However, the entertainment business. Hollywood to Forbes is the world's second-richest Relativity does have an upcoming script- and all its trappings have long proved person. Chinese companies, including ed show for CBS based on the 2011 Brad- alluring to moneymen, despite the long conglomerate Dalian Wanda Group and e- ley Cooper movie "Limitless." list of ventures that have failed. commerce giant Alibaba Group, have An acquisition could help fill out Among the buzzed-about names is shown an appetite for working with U.S. MGM's lean TV business, which includes supermarket magnate Ron Burkle, who studios. recent successes such as "Teen Wolf" on has been in business with Kavanaugh for Netflix, which has been quickly beef- MTV and "Fargo" on FX. years. He anchored a $350-million debt- ing up its stable of original shows, could Analysts aren't counting out Li- financing round for Relativity in 2012 and also make a play. onsgate, the Santa Monica studio behind is a member of the studio's board of direc- Kavanaugh has been actively meeting the "Hunger Games" and "Divergent" tors. Burkle, or another buyer, could use with potential investors regarding a bid, film series. The company, which declined the bankruptcy as an opportunity to buy according to a person familiar with his to comment, has said it wants to expand out Relativity's minority stake in its thinking. its own already-burgeoning TV produc- healthy sports agency business. The media mogul's public statements tion arm, which boasts shows such as Relativity Sports, which manages ath- have indicated that he wants to remain in Netflix's "Orange Is the New Black" and letes, is not part of the Chapter 11 filing. charge of the company after it emerges the WGN America's "Manhattan." Another possibility is Catalyst Capital from bankruptcy, but analysts say that is Most studios have so far been content Group, a Toronto investment firm that unlikely. After the ordeal he and his com- to scour Relativity's slate of completed acquired $130 million of Relativity's debt pany have gone through over the last few films and in-the-works projects to see in July and committed $170 million in weeks, he could have trouble persuading what might be worth picking off. Burbank badly needed working capital, only to investors to back him. start-up studio STX Entertainment has have its stake later bought out by Anchor- "People perceive Ryan as being part already secured one movie from the be- age. of the problem, not part of the solution," leaguered firm. Distributors such as Focus Catalyst's portfolio includes Sonar Greif said. "The person least likely to Features, IFC Films and the Orchard are Entertainment, a maker of TV movies and come out of this in the director's chair is also looking at Relativity's schedule in miniseries that changed its name from Ryan Kavanaugh." hopes of getting an inexpensive gem. RHI Entertainment in 2012 after it came Relativity has sought $45 million in Relativity has said publicly it plans to out of bankruptcy. debtor-in-possession financing to remain move ahead with its two biggest movies: "They may look at this as a way to get in business during the proceedings. Rela- "Masterminds" and "Kidnap," leaving some assets on the cheap," said Jude Gor- tivity's lawyers asked for an auction time- virtually everything else in flux. man, general counsel for the firm Reorg line that would get a sale closed by early One problem weighing on Relativity's Research. October. potential value is the lack of a robust film Outspoken hedge fund billionaire Carl At a Friday hearing in Manhattan, a library, which for other studios means Icahn is reportedly interested as well. He bankruptcy judge approved just $9.5 mil- steady profits from DVD sales and licens- approached Kavanaugh about taking over lion in interim financing, citing questions ing deals for television and on-demand Relativity and installing his son in the top about whether the proposed sale timeline streaming. Relativity sold the bulk of its job during the days just before it went would be long enough to attract bids. A library to investor Elliott Management, a under, according to the New York Post. follow-up hearing is set for Aug. 14, at New York hedge fund, in 2012. Neither Catalyst, Icahn nor Burkle which the judge may still approve the full responded to requests for comment. $45 million and the October closing tar- get.