Kavanaugh Juggles Creditors
It looks unlikely that Ryan Kavanaugh’s Relativity Media will be able to escape the consequences, legal, financial, or otherwise, in connection with misappropriating $10 million in advertising investment capital according to RKA Film Financing.
The funds in question were used to prop up the troubled production company, and according to RKA’s attorneys, contrary to contract terms. Relativity claims their Jones Day attorney wrote an opinion approving that the expenditures were permitted by the contract.
Many have been amazed with Kavanaugh’s ability to find new and preserve sources of capital even as the bankruptcy proceedings punch holes in his business model and the public representations about the health of Relativity Media.
RKA Film Financing provided Relativity $10 million in advertising capital to fund the release of five slate films. Since the beginning of the bankruptcy proceedings, RKA has maintained that Kavanaugh knowingly misused the funds for company business rather than the stated purpose. They have argued that Relativity is little more than a run-of-the-mill Ponzi scheme.
Kavanaugh says in his press release that RKA plans to “rile up the press and the court in hopes of extracting money from the wrong party.” This is “not a matter between Relativity, Kavanaugh or any of its executives and RKA, but between RKA and Colbeck.”
Even as a final deal looks possible in Judge Wiles’ bankruptcy court, RKA’s $10 million objection will not go away.