Relativity Media, the struggling "mini major" Hollywood studio behind movies such as "Immortals" and "Mirror Mirror," filed for Chapter 11 bankruptcy protection Thursday.
The filing will allow the studio led by chairman and CEO Ryan Kavanaugh to continue to operate while restructuring. According to bankruptcy documents, the company owes about $681 million to secured creditors. Of that, nearly $362 million came due June 1, triggering a search for new financing that ultimately failed.
The filing with the bankruptcy court for the Southern District of New York comes after a spate of lawsuits between it and an entity called RKA Film Financing that had lent it $84 million to market movies. RKA claims Relativity inappropriately used most of the money to stay afloat instead of on marketing. Relativity says that use of the money was never prohibited.
The bankruptcy filing came a day after Relativity announced it was laying off 75 of its approximately 350 employees.
The company amassed its fortunes co-financing big budget movies developed by major studios Universal Pictures and Sony Pictures Entertainment, like "Fast & Furious 6" and "21 Jump Street."
But it stumbled trying to produce and distribute hits of its own and had a slew of misses including "Paranoia," a thriller from 2013 that cost $35 million to make but grossed less than $8 million in domestic theaters. "Desert Dancer" cost several million to make but it grossed less than half a million dollars after being released in the U.S. in April this year.
Relativity recently pushed back the release of several movies in order to preserve cash. Those films include the Kristen Wiig-led comedy "Masterminds," which was pushed from mid-August to Oct. 9 and "Kidnap," starring Halle Berry, which was pushed from October to early next year. In a statement, Relativity said it still plans to release both.
Along with the bankruptcy filing, Relativity said it would begin a process to sell itself by October, with the initial bid coming from its major lenders, who agreed to lend the company $45 million to help keep it operating. Anchorage Capital, the lead debtholder, declined to comment.
"Relativity continues to pursue its mission as a next-generation global media company," Kavanaugh said in a statement. "The actions we are announcing today will protect our valuable franchise and allow us to emerge as a stronger, more focused company."
The company is seeking further loans to pay for the marketing of movies that it plans to release.
Kavanaugh is to remain CEO and other top executives are to remain in their positions.
Relativity said it is closing its fashion business, and said the bankruptcy filing would not affect its businesses around sports, European movie distribution or education, all of which were not used as collateral for loans.
