Ryan Kavanaugh’s company may not have made the court filings yet but they have made the first new staff cuts at the struggling company. “As Relativity continues to move forward with steps to strengthen its balance sheet and reduce costs, we’ve made the difficult decision to eliminate 75 full-time positions across several divisions,” a spokesperson at the 350 full-time employee company said today. “This is a necessary step to position the company for a strong future. We appreciate the dedication and hard work of all of our colleagues, and we are making every effort to assist and transition those who are leaving the Company.” It is unclear who among those being let go today who will receive severance packages, sources tell me.
These cuts come as lawsuit have starting flying and loan payments have been missed. The layoffs also come as the CEO is reportedly scrambling to seal a deal with new investors to avoid having to go to bankruptcy as the only option of keeping his company alive in some form.
Relativity’s wide spread financial woes have been the talk of the town for weeks with expectations that a Chapter 11 filing would come as early as today. Of course in any situation like this it is people’s jobs and livelihoods that take some of the first hits. No official word on where the cuts are coming from but Relativity’s digital unit and feature productions are the most likely to be impacted, a source tells me. The company’s TV and Sports units are expected to be spared – at least for the time being. However, long that may be in what is a very fluid situation is anyone’s guess.
Relativity Media Lays Off 75 Employees, as Chapter 11 Bankruptcy Looms
Embattled Relativity Media issued layoff notices to 75 of its 350 employees Wednesday, another sign that the debt-laden entertainment company is on the verge of a bankruptcy filing.
The workers received pink slips just after 10:30 a.m. and senior managers who remained with the company were asked to accept pay cuts.
Word came to workers after CEO Ryan Kavanaugh’s repeated failure to find new investors or loans to plug a yawning $320 million debt obligation. Relativity has postponed the release of several films, stopped payments to many vendors and left workers wondering about the future of the company.
The exact units impacted by the layoffs were not immediately known, though the reductions were expected to fall most heavily on Relativity’s ancillary fashion, education and digital units. Those are relatively new operations that are said to put a particularly onerous drag on the bottom line of the Beverly Hills-based company.
While film distribution and promotion jobs were supposed to be protected, sources said that film production jobs would likely go out the door. Relativity’s more robust television operation was also likely to have fewer job cuts.
The continued retreat of Relativity operations represented another signal of an impending Chapter 11 filing, which two sources close to the company now said is expected to come on Thursday. The company hopes a filing will help it to reorganize and emerge stronger, under its current leadership, though there previously has been pressure from some lenders to force Kavanaugh out.
The 40-year-old Relativity CEO has hop-scotched from one potential financial savior to another in recent weeks, though none have been willing to close the gap and provide the company with the year of breating room that Kavanaugh hoped for. Toronto-based Catalyst Capital briefly emerged as a possible white knight — buying $130 million in Relativity debt. But the company was quickly supplaned by an earlier lender, Anchorage Capital of New York, that was not willing to grant continued forbearance.
Relativity Lays Off 75 Staffers Prior to Potential Bankruptcy
"As Relativity continues to move forward with steps to strengthen its balance sheet and reduce costs, we've made the difficult decision to eliminate 75 full-time positions across several divisions," the company said in a statement.
Relativity Media is shedding 75 staffers as it prepares for a possible bankruptcy.
“As Relativity continues to move forward with steps to strengthen its balance sheet and reduce costs, we've made the difficult decision to eliminate 75 full-time positions across several divisions," the company said in a statement.
"This is a necessary step to position the company for a strong future. We appreciate the dedication and hard work of all of our colleagues, and we are making every effort to assist and transition those who are leaving the Company,” it added.
Ryan Kavanaugh's financially-embattled studio is expected to file for bankruptcy this week, sources close to the company tell The Hollywood Reporter.
The 11-year-old studio, which declined to comment on layoffs yesterday, acknowledged that it was reducing its staff of 350 by a quarter, but it is unclear where exactly the cuts are being made. The studio owes hundreds of millions in debt and had been scrambling to come up with the money before today. Kavanaugh has been unable to meet a number of payment deadlines, including another key deadline Monday, according to sources. In recent days, lenders have been working to strike an agreement whereby Kavanaugh exits the company once bankruptcy papers are filed, they say.
Sources say Relativity president Tucker Tooley has been asked by the lenders to stay and manage the company. Likewise, president of film production Robbie Brenner will stay in her position, according to sources.
On the film side, there will be layoffs in development, production and physical production. Other units of the company, including TV, digital and branding, are likely to take major hits. The company has long been criticized for its large overhead given that its business model is based on films expected to earn less than $100 million worldwide.
Red, the joint distribution venture between Relativity and Luc Besson's EuropaCorp, isn't likely to be impacted by today's layoffs.
Insiders say those being laid off won't receive any severance.
The statement marks the first public comments from the company in two weeks as speculation continues to mount about the future of the company and its CEO Kavanaugh. Sources say there are multiple scenarios in play if Relativity files for bankruptcy. One would see Anchorage Capital, the lead holder of secured debt, take greater control of the company. Another possibility is Kavanaugh could make a bid to buy the company back in bankruptcy if he enlists a new equity partner.