A bankruptcy judge Monday gave preliminary approval to a plan to sell the television assets of Relativity Media to a group of secured creditors while the company's flamboyant founder, Ryan Kavanaugh, tries to reorganize the rest of Relativity.
At a packed hearing in federal Bankruptcy Court in Lower Manhattan, Judge Michael E. Wiles said the proposed deal, hammered out over grueling negotiations late last week and over the weekend, appeared to conform to the basic principles of the Bankruptcy Code that seek, where possible, "to preserve a business as a going concern."
"The concept of selling the television business is correct and supported by reasonable business judgment," Wiles said. The judge said he would make a final ruling at a hearing scheduled Tuesday after the dozens of creditors and other interested parties get a chance to read the detailed proposal, which was filed with the court only a couple of hours before the hearing.
Monday's preliminary ruling is another step in what Kavanaugh's supporters hope is a Hollywood-style comeback story for the financier-turned-entertainment entrepreneur. Kavanaugh's company backed "The Social Network" and "The Fighter," only to collapse into bankruptcy this summer after it released a series of box-office bombs and failed to pay down debt.
Under the terms of the deal, the secured lender group — comprising Anchorage Capital Group, Luxor Capital Group and Falcon Investment Advisors — have agreed to pay $125 million for the TV operation, which is best known for reality shows like "Catfish" and "The Great Food Truck Race."
On Sunday, Kavanaugh announced a deal in which he and a group of investors, including supermarket billionaire Ron Burkle, would take over the non-TV assets. The consortium, which includes venture firm VII Peaks Capital, independent investor Joseph Nicholas and Burkle-backed concern OA3 LLC, will pay $60 million. Additionally, an affiliate of New York hedge fund Elliott Management will pay $35 million and take over as a lender to Relativity as it reorganizes.
Also Monday, Relativity Studios President Tucker Tooley said he is stepping down from his position at the beleaguered film enterprise after eight years. He will depart after a 30-day transition period, and longtime Relativity executive Ramon Wilson will take over on an interim basis. Tooley said he plans to shift his career efforts to "filmmaking and the creative side of the business" but did not offer details.
Starkman reported from New York and Faughnder from Los Angeles.