Ryan Kavanaugh is a billionaire no longer: Relativity Media, which made up the bulk of his net worth, filed for Chapter 11 bankruptcy today, according to a statement released moments ago. The company reportedly couldn't come up with the cash to pay off debts of at least $320 million.
Relativity says the filing does not include its sports, education and distribution businesses, but as a part of the bankruptcy proceedings the company announced it will be pursuing a sale. As such, an entity formed and owned by Relativity's lenders has acquired all of the company's assets, pending the completion of an auction to be conducted by Blackstone Group and FTI Consulting by early October.
"The actions we are announcing today will protect our valuable franchise and allow us to emerge as a stronger, more focused company,” said Kavanaugh in the statement. “Our board and management team explored a variety of options to refinance Relativity’s debt, and we ultimately determined that the protection afforded by a court-supervised reorganization process will provide additional time and structure to achieve our financial and strategic objectives.”
The news comes after months of rumors concerning the state of the miniature entertainment conglomerate's financial health and darker developments this week. The company laid off 75 employees yesterday, and sources close to the situation say that none were given severance.
A company spokesperson declined to comment on the matter; a representative for billionaire Ron Burkle, who plowed some $350 million in the company two years ago (some of it in the form of a loan), did not respond to an interview request.
These developments seemed unfathomable not too long ago. In 2013, FORBES pronounced Kavanaugh a billionaire based on Burkle's investment (he received a 20% stake). At the time, Relativity was enjoying success with films like Limitless (2010), which starred Bradley Cooper and grossed $162 million worldwide.
Kavanaugh attributed his gains to a Moneyball-for-movies strategy, banking on mid-budget flicks with strong foreign presales that he claimed could insulate Relativity from Hollywood's vicissitudes. Kavanaugh bragged his secret sauce was a Monte Carlo simulation adapted from his Wall Street days that could detect films likely to flop.
“We’re a very risk-mitigated company,” said Kavanaugh at the time. “Which I think is ironic because some people still see me as a cowboy.”
A string of disappointments knocked him off his saddle. Since the beginning of 2014, none of the company's films have reached the modest $70 million mark in worldwide box office sales. The closest was Brick Mansions, which took in $68.8 million last year (and likely wouldn't have even done that if it hadn't been Paul Walker's first posthumous role).
Relativity said it raised a fresh $250 million in April, followed by an early July deal valued at $320 million--and pushed back release dates of multiple films--but it wasn't enough to stave off bankruptcy.
Some say there's more than just bad luck at play. A recent $90 million action accused Kavanaugh of misappropriating funds from RKA Film Financing and operating "a scheme to defraud investors." Kavanaugh denied the claims and fired back with a $200 million suit of his own.
At the present time, Kavanaugh's precise net worth remains up in the air as more details of the Relativity bankruptcy filling emerge. Regardless of the outcome, one thing seems certain: Kavanaugh won't be back on our Billionaires list anytime soon.
UPDATE: According to new court filings, Kavanaugh owned only 12% of Relativity's Class A shares and 8% of its Class B shares; as of the end of 2014, the company was reporting $560 million in assets and $1.2 million in liabilities.
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