Bidding for Relativity Media is expected to be muted

Ryan Kavanaugh may have been one of the most outspoken figures in the film industry, but potential bidders for his company have been conspicuously quiet.

Relativity Media went to Bankruptcy Court this summer in hopes of finding a buyer. But its auction next week is not expected to spark a bidding war.

Bids for Relativity, founded in 2004 by Kavanaugh, came due Friday, though no details were revealed about possible buyers (some could emerge at a New York court hearing Monday). None of the bids are likely to top the $250-million starting price offered by a group of Relativity's creditors in August, according to investment bankers and bankruptcy law experts watching the case. 

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Multiple parties have made offers for parts of the company and individual films, though those bids have yet to be made public, said people familiar with the auction who were not authorized to discuss the matter.

If the so-called stalking horse bidders — Anchorage Capital Group, Luxor Capital Group and Falcon Investment Advisors — end up taking control of the company, it would be an anticlimactic ending to an auction that creditors hoped would bring out a higher price.

A representative for Relativity declined to comment.

Industry watchers cite several explanations for the apparently tepid interest in Beverly Hills-based Relativity. Some bidders may have been spooked by the high price from the stalking horse bidders. Some have put the value of the company closer to $100 million.

Others may be cool on the assets themselves.

Lloyd Greif, chief executive of Los Angeles investment banking firm Greif & Co., noted that Relativity lacks a robust film library and has failed to produce many box-office hits. Many of the company's unreleased films have already gone to other studios.

"The bones have already been picked over in some respects," Greif said. "There has to be something you can leverage here. I don't think there's a whole lot here."

The film side has struggled to produce hits, despite some successes like "Immortals" and "Safe Haven." Recent bombs include the rust-belt drama "Out of the Furnace" and the poorly reviewed comedy "Movie 43."

It's a tough time for anyone to sell a studio, let alone a company with a weak track record. Studios are making fewer movies and are making less money from traditional sources of income, such as selling international television rights to movies.

Relativity filed for bankruptcy protection on July 30 after it failed to come up with the money to pay down its heavy debt burden.

The company, known for films such as "Act of Valor" and "Limitless," lists nearly $1.2 billion in liabilities and a book value of $560 million, according to court documents.

Relativity's television business, led by Tom Forman, is likely to attract the most interest among Relativity's businesses. The unit produces reality programming such as "Catfish" on MTV. It also has the new CBS show "Limitless," based on the 2011 Bradley Cooper movie. "Limitless" debuted this week to solid ratings.

However, TV shows represent a comparatively small portion of Relativity's overall business. Television accounted for about $97 million in sales in 2014, compared with $346 million from movies, according to court filings. Relativity's other businesses include music, digital media and branding.

An auction is set for Oct. 1, and the court-approved schedule calls for a sale to close by Oct. 20.

But the sale plan has been complicated by resistance from some directors, television networks and other business partners, who worry they will not be paid once the transaction is complete.

"The number of objections that have been filed is pretty significant," said Brian Davidoff, an attorney at Greenberg Glusker Fields Claman & Machtinger.

Relativity made a name for itself co-financing movies such as "Bridesmaids" and "The Social Network." But box-office duds and a heavy debt load drove the mini-major studio to Bankruptcy Court.

Last month, Judge Michael Wiles gave the go-ahead for $49.5 million in debtor-in-possession financing to keep the studio running as potential bidders circle.

After Relativity filed for Chapter 11 protection, Hollywood executives and banking professionals speculated about who might line up to bid for all or part of the company. Possible interested parties included private-equity firms and rival studios such as Metro-Goldwyn-Mayer and Lionsgate, but the companies have remained quiet so far. It remains to be seen whether Kavanaugh will make his own play for the company.

If no individual offers for the whole company top the stalking horse bidder, Relativity will evaluate the group of buyers looking to buy the various parts of the firm, bankruptcy experts said. If the auction falls short, the creditor group will take control of the company. Another suitor could then try to buy the company from the investors at a discount.

"At the end of the day, banks don't want to own studios," said Steven Gubner, managing partner of Ezra Brutzkus Gubner.

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