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D’works peddles bonds

NEW YORK — Chase Securities and Bear Stearns have begun selling a $325 million film financing bond issue for DreamWorks Plc, sources said, to finance the company’s expected production slate of 16-18 pics over the next three years.

The deal highlights the shift among major Hollywood studios to off-balance sheet film financing, as it is similar in many respects to the film financing deals done by Citibank in the past year for News Corp’s 20th Century Fox and Seagram Co. Ltd’s Universal Studios. Details of the deal were confirmed by a person close to the situation, but DreamWorks execs did not return calls.

Whereas the Citibank deals raised funds from the commercial paper market, Chase and Bear are selling medium-term bonds to institutional investors. With backing from insurance companies, also a feature of the Citibank deals, the bonds have triple A credit ratings.

Like the Citibank structure, the bond issue won’t finance the production of the films until completion of the pics. DreamWorks has a $1 billion revolving credit line with Chase already in place, which will finance the production of pics. On completion, the films are sold into an off-balance sheet vehicle, which repays the studio.

One of the obvious differences in the deals is that Citibank raised at least $1 billion dollars each for Fox and Universal, whereas DreamWorks is raising about one-third as much. People close to the deal said this simply reflected DreamWorks’ production slate.

Whereas other studios are producing between 15 and 25 pics a year, DreamWorks’ annual production slate will rise from three to seven pics over the next three years.

“This security has 16-18 films in it, whereas Universal will have 60,” said a banker.

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