It was only the beginning when a deal to pull Ryan Kavanaugh’s Relativity Media out of bankruptcy was approved by a federal judge.
Over the course of the next 27 days, a horde of lawyers – by some estimates more than 100 – pored over reams of documents that made up a complex web of financial agreements upon which Beverly Hills-based Relativity’s exit from a seven-month bankruptcy was built.
“There were a lot of people coming to the table with different interests to protect,” said David Sunkin, a partner at downtown L.A.’s Sheppard Mullin who helped lead the team doing the deal.
While the production company is still ironing out some of the corporate kinks – Relativity’s website reportedly waffled in recent days on whether there are one or two chief executives – the finalized deal filed April 14 all but assures the company will move forward. At press time, Kavanaugh has been joined by Joseph Nicholas as co-chairman and chief executive of Relativity.
Nicholas, a hedge fund manager from Chicago, put up $35 million in convertible debt financing at the closing in addition to earlier funding contributions. Kevin Spacey collaborator Dana Brunetti has been installed as head of the company’s creative division.
It’s a dramatic turnaround for Relativity, which shed almost a billion dollars in debt during the bankruptcy process. The company also won a big victory April 21 when U.S. Bankruptcy Judge Michael Wiles ruled Relativity’s lucrative licensing deal with streaming service Netflix Inc. would remain intact.
The smooth waters the company now finds itself in belie the churn of lawyers in its wake, however.
Along with Sunkin, the primary architects of the deal were Jones Day’s Rick Wynne and Skadden Arps Slate Meagher & Flom’s Van Durrer, both of whom are also based downtown. Sunkin and Wynne worked on the deal for Relativity; Durrer represented Kavanaugh in the closing.
The three lawyers were putting together pieces given to them by four existing creditors of the company – collectively known as the Manchester creditors – as well as Nicholas’ $35 million contribution and an additional $40 million from Chicago-based MidCap Financial Trust. The machinations required exceptional attention to detail and extreme patience, according to Sunkin, who said every minor change necessitated a reevaluation of almost the whole deal.
“It was like a balloon filled with air where when you press on one part of it, every bit of surface area is affected,” he said. “Luckily, everyone on the team got along really well and everyone was able to collaborate across firms nicely.”
