SAG-AFTRA is pleased to announce impending residuals payments related to the Relativity bankruptcy. All residuals that came due during the bankruptcy, from July 31, 2015 through April 14, 2016, will be paid in full. We expect these payments to be completed in the summer of 2016. Payments on pre-bankruptcy residuals claims are more complex but we achieved substantial recoveries and payments are forthcoming over the next two to six months. All residuals coming due after mid-April 2016 will be paid by the reorganized Relativity in normal course.
History: When Relativity declared bankruptcy in late July 2015, they owed about $1.1 billion to various hedge funds, banks, the unions, guilds, producers and other creditors. The bankruptcy court approved a final Plan of Reorganization in February 2016, which became “effective” on April 15, 2016. Reorganized Relativity will continue producing and distributing theatrical motion pictures. Relativity’s television division was sold to several hedge funds in October 2015 and continues in business under the new name “Critical Content.” Relativity managed to eliminate about $500 million in debt over the course of the bankruptcy.
Through outside counsel at Bush Gottlieb representing SAG-AFTRA, the DGA, the WGA, their pension and health plans, and the Motion Picture Industry Pension and Health Plans, the union will be collecting money based on union-represented performer claims.
Here are some of the highlights:
- Reorganized Relativity will be responsible for post-bankruptcy residuals. This is an excellent result because it is not a given in bankruptcy cases: bankruptcy law can permit liens and obligations to be stripped from assets.
- All residuals that accrued during the bankruptcy will be paid in full.
- All secured SAG-AFTRA claims that came due before Relativity filed for bankruptcy will be paid in full. A secured claim means that the union took a secured interest (also known as a lien or mortgage) in the project through the Financial Assurances process before the film went into principal photography. For more information on the Financial Assurances process, click here. This result is a great success as there was fierce competition among the hedge funds, banks and unions over legal and contractual rights among competing secured claims.
- Unsecured SAG-AFTRA claims that came due before Relativity filed for bankruptcy will be paid over time, through participation in a “litigation trust” operated for the benefit of Relativity creditors. These recoveries are speculative and may take years to realize. The Debtors have projected recoveries ranging from 4 percent to 11.5 percent on each dollar in allowed claims.
Normal payroll procedures will be used to process all payments to union-represented performers. This is not always achievable in bankruptcy, and is a great convenience to performers.
We ask for your patience as we work to implement all of the above. Outside counsel continues to attempt resolution of certain contractual disputes with Relativity and is pursuing non-Relativity companies that are obliged to pay residuals on product associated with or formerly controlled by Relativity. The union’s ongoing signatory and financial assurances processes remain key to achieving the best possible results for members in bankruptcies.