After spending nine months trying to close a $450-million film financing deal to offset the cost of 30 upcoming movies, Paramount has been forced to give up the chase.
The studio was working with Deutsche Bank to try to arrange what would be its third slate film-financing arrangement, but after the bank was unable to syndicate the senior debt part of the funding, the deal has come to a screeching halt ,and Deutsche Bank has decided to shutter its pioneering film-financing operation, according to the Financial Times.
Over the past four years more than $13 billion has poured into Hollywood from once-rich hedge funds, private-equity firms and investment banks in the form of co-financing deals with practically every major Hollywood studio. In fact, both Deutsche Bank and Paramount were early participants in such deals, with Paramount completing the first of these slate deals with Merrill Lynch in 2004 and Deutsche Bank following soon thereafter with a $600 million deal between Sony Pictures Entertainment, Universal and Ryan Kavanaugh’s Relativity Media.
But ever since the beginning of the credit crunch last summer, the dealflow has turned into a trickle. In fact, apart from Merrill Lynch’s $500 million fundraising deal for United Artists, not a single film-financing deal involving a bulge-bracket bank has closed since last summer. And one by one, the banks have decided to get out of the movie-making business.
Dresdner Kleinwort called it quits after losing star film-financing banker Laura Fazio to Deutsche Bank. Citigroup, meanwhile, seems to have stopped doing such deals after the firm’s $550 million Beverly deal with Relativity Media and Sony Pictures Entertainment was supposedly poorly received by higher-ups at the bank. Now, Deutsche Bank is bowing out as well.
The firm hired Fazio nearly a year ago, in a major coup, nabbing a star dealmaker to revive an operation many perceived as dead after Deutsche’s main film-financiers decamped for Citigroup. Unfortunately, the bank hasn’t closed a film-financing deal since then, aborting an effort to raise money for MGM with Goldman Sachs and failing to complete this Paramount deal. Now, sources tell Nikki Finke that Fazio and two other media and entertainment bankers at Deutsche Bank are out as the firm reorients its structured finance operation.
Meanwhile for Paramount, who knows whether they’ll be able to complete this financing with another source, since the studio doesn’t have many options, at least not in the U.S.? Instead, they’ll have to continue financing their movies entirely by themselves, which isn’t such a problem for blockbuster franchises like Transformers, but it is when you’re taking on all of the costs—and risk—for flicks like Drillbit Taylor, The Love Guru and probably most of the films the studio will be releasing once DreamWorks decamps this fall.
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