Published On: Thu, Jul 16th, 2015

Relativity Media’s Ryan Kavanaugh Is Being Sued for $7.5 Million Over Missed Loan Payment

The suit comes as news breaks that the company will not be getting its expected $320 million investment bailout.

Relativity at 10 party

RKA Film Financing is suing Relativity Media’s Ryan Kavanaugh over his failure to meet the deadline on a $7.5 million loan payment. The suit was filed yesterday in a Supreme Court of the state of New York.

Kavanaugh comes from a Jewish family which had changed its name from Konitz.

The head of Relativity is personally liable for the debt, the plaintiffs claim, because he used funds loaned to his company for projects other than what he had agreed that they would be used for.

If this is true, then the entertainment mogul may be forced to pay back the money out of his own pocket, even if Relativity Media goes bankrupt.

Kavanaugh dismissed the suit in a statement saying, “This lawsuit is ridiculous. I invested $10 million of my own capital into RKA, the entity that is suing me. My $10 million investment is the riskiest part of the capital structure and is subordinate to other capital.”

“There is no default on the loan or facility and there has been no improper use of loan proceeds. This is nothing more than other investors trying to take advantage of Relativity’s current restructuring being delayed and market noise to squeeze the $10 million I invested out of my pocket and into theirs.”

In an explanation for the late payment, Kavanaugh spokesman David Shane said, “Unfortunately, Relativity’s payment to RKA was delayed as a result of the company’s pending refinancing. We expect this matter to be resolved shortly.”

But is this really the case? Observers do not believe that Relativity Media will ever get the funding which it needs to remain solvent may end up going under.

News of the civil suit comes at the same time that Variety had exclusively reported that a promised infusion of $320 million in new capital from investors, which would let the company pay off its debts, was greatly exaggerated.

Catalyst Capital Group of Canada was supposed to be putting up the $150 million to meet Relativity’s current debt payment, but Variety reports that this is simply not the case.

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