It’s time for the weekly DreamWorks-Reliance deal update (83 days and counting!). But instead of another article insisting the deal is just days away (it’s almost done, we swear), the LA Times finally figures out what’s causing the hold up: the debt financing component, which means that the dreaded credit crunch has reared its ugly head again.
LA Times: Although Reliance is poised to invest $500 million in the venture for a 50% ownership stake, that deal hinges on the group getting a firm guarantee from lead bank JPMorgan Chase to raise up to $700 million in debt financing to satisfy the business plan to make four to six movies a year. JPMorgan, which will not underwrite the entire portion of the loan as DreamWorks had hoped, will now attempt to syndicate it — and that could take months. People close to the matter say that DreamWorks is still looking for further clarification on the term sheet it recently received from the lead bank and that negotiations are continuing.
All of this means that the protracted deal that DreamWorks was hoping to have locked up by now may not happen until November or December. And you can just imagine how pleased this must make Spielberg’s DreamWorks colleagues David Geffen and Stacey Snider, who have been champing at the bit to leave Paramount Pictures after a stormy 2½-year relationship with studio chairman Brad Grey. Grey and his team at the Viacom Inc.-owned studio, which bought DreamWorks for $1.6 billion in 2006, also can’t wait to be free of the DreamWorks foxes in the henhouse.
Of course, there’s always a chance that the stars may align sooner and this overly talked-about deal will finally get done. Geffen, who had an option to get out in his Paramount contract in January of this year, still hasn’t given the studio official notice. Once he does, both Spielberg and Snider can leave 60 days later, but no earlier than Oct. 31 of this year without getting Paramount’s blessing. Paramount is not expected to stand in their way if they want to leave sooner.
When this deal was first announced to be in the works (more than two months ago), we asked a source familiar with film-financing deals if Spielberg and Geffen would even be able to raise the money they needed in this tight credit market.
He noted that the banker working on the deal was probably worried about the same thing but suggested that this deal might have an easier time closing than the Wall Street structured finance deals that were collapsing all over town, since it was a borrowing-based deal, which is easier to close. He also speculated that if anyone could get a deal like this done, it would be Spielberg and Geffen. Well, so much for that.
Then again, maybe we won’t know for several months. Any chance Reliance would be willing to put up another $700 million?
Business Insider Emails & Alerts
Site highlights each day to your inbox.