Yesterday, July 30, 2015, Relativity Media, the struggling “mini major” Hollywood studio, filed for Chapter 11 Bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. The filing will allow the Beverly Hills, California based studio, led by its founder, chairman and CEO Ryan Kavanaugh, to continue to operate while restructuring. According to bankruptcy documents, the company, along with 144 subsidiaries and holding companies that also filed petitions, owes about $681 million to secured creditors, but only claims assets between$100 million and $500 million.
Founded in 2004, the company amassed its fortunes by co-financing high-profile movies developed by major studios Universal Pictures and Sony Pictures Entertainment, like “The Fast and the Furious: Tokyo Drift,” “Evan Almighty,” “Talladega Nights: The Ballad of Ricky Bobby,” “Ghost Rider,” “Hancock,” “Fast & Furious 6” and “21 Jump Street,” among many others. Relativity Media stumbled trying to produce and distribute hits of its own and had a slew of misses, including “Machine Gun Preacher,” “Paranoia,” “Desert Dancer,” “Oculus,” and “Don Jon.”
As it prepared for the expected bankruptcy filing, Relativity on Wednesday sent layoff notices to 75 of its 350 employees. “Regrettably, as a result of the need to reduce costs, we have had to make some difficult staffing decisions,” Mr. Kavanaugh said in a statement on Thursday. Mr. Kavanaugh also stated that he believes the bankruptcy filing “will protect our valuable franchise and allow us to emerge as a stronger, more focused company.”
In order to conduct ongoing operations, Relativity is pursuing $45 million in interim financing, known as a debtor-in-possession loan, also known as a D.I.P. loan, to help pay for the ongoing Chapter 11 process.