Financing arrangement was worth $450 million
In another sign that the love affair between Hollywood and Wall Street is cooling, Paramount Pictures says it has walked away from a $450 million slate financing deal with Deutsche Bank.Under the terms of the deal, Deutsche would have funded 25% of each film’s budget on a slate of Paramount films, capped at $30 million per pic, totaling roughly $200 million a year. But the Melrose studio says it balked at the deal points and has decided to pursue alternative sources of coin, a move that has prompted Deutsche to shutter its film financing unit. A Paramount spokeswoman, who blamed current credit market conditions for the deal’s demise, said, “The deal terms had evolved to a point where they were unattractive when compared to alternative sources of financing available to Paramount.” Deutsche declined comment late Monday, but word of a bloodletting had spread earlier in the day. Several finance vets reached Monday evening said Deutsche had axed the entire film finance team, which included Laura Fazio, the unit’s top exec who was poached from Dresdner last year to try to kick-start Deutsche’s Hollywood forays. But the bank was stuck selling senior debt at exactly the wrong moment. “The market has just sort of seized up,” said one person who has arranged financing for several studios in recent years. “Things are going to take a while to be digested given the aversion to risk right now.” The fact that Par, after so many lean years, is finally on a roll at the B.O. had no bearing on the fate of the Deutsche fund. “You’ve read the warning labels on these things,” one Wall Streeter said. “Past performance is no guarantee of future results.” It is unclear what effect Deutsche pulling its money out of Hollywood will have throughout the industry. The bank has its fingers in a number of Hollywood pies. Deutsche committed the initial loan on Ryan Kavanaugh’s Relativity Media Gun Hill I fund, which co-financed a slate of Sony and Universal pics. But in the past year, the bank has become skittish when it comes to Hollywood: An MGM package led by Goldman Sachs and Deutsche collapsed. And with the credit crunch continuing unabated, Wall Street has retreated from Hollywood, with several banks, including Dresdner, moving out of film financing. As for Paramount, vice chairman Rob Moore insisted that the deal collapse “won’t affect our current or long-term production slate.” In fact, several of the studio’s upcoming tentpoles have co-financing in place, including “The Curious Case of Benjamin Button” (Warner Bros.), “Star Trek” (Level 1 Entertainment), “Transformers 2″ (Melrose 2) and “G.I. Joe” (Spyglass Entertainment).
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