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Steve Gubner Quoted in Los Angeles Daily Journal Article on Relativity Media

Steve Gubner was quoted in the following article, which appeared in the Los Angeles Daily Journal on October 7, 2015.

Court approves $125M stalking horse bid for Relativity’s TV assets

By Ashley Cullins

The closely watched and highly contested Relativity Media LLC bankruptcy is one step closer to a final resolution after an unexpected twist Tuesday, as the court approved a $125 million stalking horse bid for the lucrative television arm of the company.

The group of lenders, operating as RM Bidder LLC, initially offered a $250 million credit bid for all of Relativity’s assets, and therefore the pared down offer was unexpected, according to Jeffrey A. Krieger, partner at Greenberg Glusker Fields Claman & Machtinger LLP who is representing a number of interested parties, including Discovery Communications LLC and director Brett Ratner’s Rat Entertainment Inc.

“When the auction was over, we learned that only the television assets were being sold and that the film assets and some other miscellaneous assets were being kept by Relativity,” Krieger said. “That type of change is unusual.”

U.S. Bankruptcy Court Judge Michael Wiles approved the credit bid from the lenders following a Friday auction. The lenders secured Relativity’s television assets, which includes rights to 435 scripted and unscripted television projects in development, according to the term sheet filed with the court. It also includes various physical property, escrow funds, cash in bank accounts owned by the TV entities, music licenses and rights and tax credits.

Krieger said that a company’s assets are typically split up during a bankruptcy action as a result of an overbid or group of overbids. In this case, however, Krieger said behind the scenes negotiations led to a lower offer for only a portion of the assets, leaving the remainder of the assets still in the company.

Relativity had thousands of creditors, between $500 million and $1 billion in liabilities and between $100 million and $500 million in assets, according to the Chapter 11 filing. In re: Relativity Fashion LLC et al., 15-11989 (Bankr. S.D.N.Y., filed July 30, 2015)

The lenders also agreed to sell $60 million of the debt to Relativity CEO Ryan Kavanaugh and his backers, and another $35 million to Manchester Securities Corporation. Steven T. Gubner, managing partner of BG Law LLP, said he is surprised to see Kavanaugh back in play.

“If Kavanaugh does come out of this with the [film] assets, it will be very interesting to see what restrictions his new financial backers place on him in operating the studio,” Gubner said.

Krieger echoed the sentiment, adding that while it’s not unusual for an insider to make a bid, there had been no indication that any part of Relativity Media would survive and move forward in some capacity.

“There were over 60 objections to the sale,” Krieger said, adding that the objections ranged from whether or not a particular contract is assignable at all, to the amount that must be paid to cure any defaults. The sale now only includes television assets, and Krieger said that roughly 10 objections remain – still a significant number.

A hearing to address contested matters is scheduled for Oct. 14, ahead of the Oct. 20 closing deadline.

Relativity is represented by Sheppard, Mullin, Richter & Hampton LLP, who deferred comment to Relativity, and Jones Day, who did not respond to a request for comment.

Mark Shinderman, partner at Milbank, Tweed Hadley & McCloy LLP who represents the lenders, declined to comment.

Relativity Sports LLC, Relativity Sports Management LLC, Relativity Education LLC and Relativity Europacorp Distribution LLC have not filed for relief under Chapter 11 of the U.S. Bankruptcy Code.

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