Bankruptcy Lawyer Bryan W. Stone answers the question “What is Chapter 11 Bankruptcy?”
In a real-world flip flop that would have probably lost some votes for the fictional role he portrays on television, House of Cards actor Kevin Spacey backed out of plans this week to become Relativity Media’s newest chairman, mere days after declaring via video to the company’s bankruptcy judge that he was excited to take on the position.
Relativity Media, the group that produced “The Social Network,” “Talladega Nights,” and dozens of blockbuster hits over the years, used to be one of the largest leading independent film studios in the world. That is, however, until last year when they filed for bankruptcy.
All is not lost for the company— bankruptcy provides a saving grace for many individuals and companies whose debt-asset ratio has gotten out of control. It allows them a chance to pay off their debts and receive a financial fresh start.
However, the media group has taken two unfortunate hits within the last couple of weeks that leave the company unsure as to whether the bankruptcy judge will approve their Chapter 11 business reorganization plan. The judge in the case told Relativity earlier this year that in order to approve their bankruptcy repayment plan, he wanted the media group to do two things:
- Raise $100 million of investment in the company
- Lock down Kevin Spacey and producing partner Dana Brunetti’s employment contracts as Relativity’s new film executives have previously discussed.
The famous House of Cards actor and Brunetti had been in talks with Relativity for some time, but neither had signed contracts. Even so, as recently as this February Spacey sent a recording of himself to Relativity’s bankruptcy judge urging the court to accept the company’s reorganization plan, stating he was “enormously excited” to be taking over creative direction of the company.
However, this week the actor publicly declared that his acting career will not allow him time to work for the movie studio. The famous actor’s acquisition was expected to be a game-changer for the company and help it attract higher-quality projects. Spacey and Brunetti have produced award-winning films together that hit big in the box office, and Spacey would have brought an undeniable star power to the company.
Frank Underwood waits for no man…or movie company.
Relativity has also only raised $20 million in investment money out of the $100 million the judge asked for. The company claims its plan is still workable despite this because it reduced its overhead drastically, but bankruptcy experts have voiced deep skepticism that the judge will allow the bankruptcy to proceed when neither of the things the judge asked for have come to fruition.
The studio originally filed for bankruptcy in July 2015. It reportedly lost $135 million in 2013 and $118 million last year when some of its movies projected to do well at the box office did not perform well and slumped them into the red.
The company’s cash balance at the beginning of this month was listed as $6 million in court records; this is down from $33.5 million last October. At that rate, the company could run out of cash before the judge accepts their bankruptcy plan. This could force the company to liquidate.
The bankruptcy judge is expected to announce his decision at the next hearing in the case on March 31. We’ll have to stay tuned for updates. This case is a reminder that in repayment plan bankruptcy such as Chapter 11 for businesses and Chapter 13 for individuals, the bankruptcy judge has to actually approve your repayment plan before you can put it into action and start paying off your debts.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
See Our Related Video from our YouTube channel:
See Our Related Blog Posts: