Vets set up shop at Donaldson Lufkin Jenrette
NEW YORK — The team of bankers responsible for billion-dollar, off-balance-sheet film financing done for 20th Century Fox and Universal Studios in the past two years has defected from Citicorp to Wall Street firm Donaldson Lufkin Jenrette, bankers said Friday.
The move instantly makes DLJ a force to be reckoned with in the market for big film financing deals, and weakens Citicorp’s strength in the industry.
The defections come as Metro-Goldwyn-Mayer resumes discussions with banks about off-balance-sheet film financings worth $400 million to $500 million. The discussions had been under way for several months before the studio’s recent financial crunch brought them to a halt.
Leo ‘not committed’
An MGM spokeswoman said Friday that recent commitments by MGM majority shareholder Kirk Kerkorian to pump in $500 million in new equity have allowed the discussions to resume. The Lion spokeswoman said MGM was talking to Citibank, among others, but she emphasized MGM was “not committed to Citibank” at this stage.
Sources said Friday a group of 10 bankers jumped from Citicorp to DLJ one by one over the past three months, taking the core of Citicorp’s expertise in the film financing area. First to go was Laurence Nath, a managing director in Citicorp Securities’ capital structuring unit, and the defections ended earlier this month when Andrew Sriubas, VP in Citi’s global media and communications group, moved across.
Nath’s unit was responsible for designing the extremely complex off-balance-sheet financing used for companies in a range of industries, including film, tele-communications and oil and gas. Nine of 13 people in Nath’s unit have gone to DLJ, sources said.
Sriubas was a media banker who acted as a liaison between Nath’s group and the entertainment companies.
Film deals done by the group include a $1.1 billion film financing for Universal last year and a $1 billion deal for Fox in 1996, the two biggest film financings ever done. The group is believed to have been working on a film financing for Polygram Filmed Entertainment before the purchase of PFE’s parent Polygram Holdings by Seagram ended the discussions.
All these deals allow studios to raise money for film production without the funds appearing on their balance sheets, so the studios and their parent companies can use their own capital for other businesses, an increasingly important goal for big media companies.
The financings also help “smooth out” the volatile profits and losses from film production. Bankers said the financing product can be used elsewhere in media, such as in broadcasting and cable.
Aside from Citicorp, only a handful of banks have operated in this end of the film financing market in recent years, including ING Capital, Sumitomo Bank and Credit Suisse First Boston.
DLJ, which has become a major presence in media and entertainment investment banking in recent years, is “absolutely” committed to becoming a big player in film financing, said Garrett Moran, a vice chairman in the firm’s banking group who confirmed the hirings.
“We expect that this will make us a much more effective broad ranging banking firm,” Moran said.
Citicorp retains a big group of media bankers, led by Ellen Alemany, but it has lost most of its technical expertise to structure film financings, observers said.
Amy Dates, a spokeswoman for Citicorp, disputed this suggestion. She said only Nath and Sriubas worked exclusively on film financing deals and the rest of the team worked on a range of industries.
Dates said Citicorp retained at least a dozen staffers in its capital structuring unit who had worked on film financing, a claim denied by sources close to the situation. Dates said Citicorp also kept staffers in its securitisation group experienced in film deals.
“Citibank’s film financing won’t be affected. We are continuing to work on mandates that we have in house,” Dates said.
Whatever the case, competitors are sure to point to the defections in marketing pitches as they attempt to snatch business away from Citi. Rival bankers said the defections were already surfacing in discussions with Hollywood studios and appeared to be clouding Citi’s chances.
The defections were prompted by uncertainty within the bank’s securities division about the impact of Citicorp’s $70 billion merger with Travelers Group, sources said. Travelers is the parent company of Salomon Smith Barney.
Some bankers question whether DLJ has the capital to compete with big commercial banks, but Moran insisted DLJ was prepared to commit its own capital to build the business.