By Sue Zeidler
This week, J.P. Morgan, considered to be the entertainment
industry's top banker, finalized two film-related financings
totally nearly $1 billion, showing how resilient movie magic is
to the gloom and doom on Wall Street.
"People will continue to go to movies, buy or rent DVDs and
watch pay-per-view," said Eileen Burke, a managing director at
investment firm D.B. Zwirn & Co.
"In terms of entertainment companies' ability to access
capital, I think if you have a good company with a good asset
base, you can still borrow money. Well-structured deals are
getting done," she said.
J.P. Morgan led a $700 million debt financing for India's
Reliance ADA Group to help fund its new venture with Steven
Spielberg and the DreamWorks SKG team, sources close to the
deal said on Friday.
The investment bank also is expected to close on Friday a
$295 million financing for Media Rights Capital, the company
behind a new Cameron Diaz movie called "The Box," said banking
sources with knowledge of the deal. Comerica Inc was another
underwriter, they said.
"Every banker I talk to right now is pretty grumpy and say
the markets are as bad as they've ever seen," said Bill
Johnson, a partner with Inferno Distribution LLC in Beverly
Hills, California.
However, he said that there was still healthy interest in
Hollywood deals, albeit of a smaller scale.
"When the wave of fear subsides, I think the smarter
bankers and investors will see the film class as recession
proof and a good investment," he said.
HEDGE FUNDS OUT
To be sure, Hollywood has taken a hit from the credit
crunch. Months ago, hedge funds that had poured $15 billion
into film deals over the last three years started to retreat.
Those funds, partnered with big banks, had backed slates of
movies from studios like Sony Corp's Sony Pictures, Viacom
Inc's Paramount and Time Warner Inc's Warner Bros., shouldering
some of the risks usually absorbed by studios in return for a
share of box office sales.
Paramount recently ditched efforts to raise up to $450
million in a slate deal with Deutsche Bank and is said to be
now planning to co-finance films on a picture-by-picture basis.
"We've seen hedge funds pull back to some extent, as a
number of deals done in the last two years haven't met
expectations," said Burke.
But while slate financings are no longer popular, Hollywood
insiders say plenty of well-structured deals are still getting
done for middle market film and entertainment companies.
These financings are typically $100 million to $300 million
bank loans for films in production, with collateral such as
receivables, film libraries and inventory credits.
Walt Disney Co recently said it sees no problem finding new
investors in a down market but may not want to share profits or
ownership going forward and has not yet decided whether to turn
to outside film financing again when its Kingdom Films LLC deal
runs out in mid-2009.
Suisse First BostonAramidOliver Stone
(Additional reporting by Gina Keating, Los Angeles; editing
by Carol Bishopric)
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