Financiers disclose some tricks of the trade
Hanson has had a good year, but adds that in today’s economy a number of projects are proving more difficult to put together. “You have a smaller range of intersection between what the producers and the talent are willing to work for and the capital available,” he says. “After several years of people taking advantage of too much capital in the marketplace, it’s sort of a return to rationality.”
The good news for QED is that the senior lenders are still around. “The bad news,” he adds, “is that it’s a much more cautious credit environment. The impact is that you either need to raise more expensive capital or you need to compress your budgets to a rational number.”
Short term, the dealmaker is looking to wealthy capital sources, particularly in Asia and the Middle East. “Offshore is enhanced by a weak dollar. I think we’re going to see that trend continue,” Hanson says. “Anyone who’s a professional knows that this is a high-risk business. But you always want to do right by your capital sources.”
KEY DEALS: Financing and distribution for “District 9″
TECH TOOLS: An HP calculator designed 40 years ago. “If you can’t do your deal mechanics on it, your deal is probably too complicated.”
TOP CAUSE: Leukemia and Lymphoma Society
ROLE MODEL: Peter Schlessel of Sony
Head of entertainment finance, Union Bank
LaCour knows what it takes to craft a deal bankers can stomach these days. “It’s about knowing the debt market, what will sell and what risk appetite banks have right now,” he says. Putting that knowledge to work as the credit markets have slowly loosened, LaCour closed two of the biggest entertainment-biz bank deals in the past six months,
KEY DEALS: Led the close of $300 million Relativity Media financing pact. Through its Beverly 2 subsidiary, Relativity plans to use the money to fund movies in a co-financing and co-production accord with Universal. Was behind $200 million Lionsgate Mandate funding vehicle. Helped secure $65 million revolving credit facility for River Road Pictures.
TECH TOOL: “I can’t live without my headset.”
TOP CAUSE: Athletic teams at alma mater Chatsworth High
ROLE MODEL: Father
Senior VP, Comerica Entertainment Group
There’s a trick to staying afloat for the long haul in the game of financing films, but it doesn’t involve any hocus-pocus, per Underwood. “How do you lend money to an inherently risky business and survive?” he asks. “It’s actually pretty simple: You do the boring things.”
Those boring things, such as primarily lending against film pre-sales rather than unknowns like pic performance have helped Underwood remain within the diminishing club of bankers who continue to be active in single-picture and slate film financing.
Staying that course — especially when there always seems to be a new bank or financier that think they’ve figured out how to predict film risk — is not always easy, Underwood says: “Once you start stretching your risk tolerance to be competitive with them, you’re headed for trouble.”
KEY DEALS: Principal negotiator for Comerica which, with Union Bank, provided $300 million credit facility to Relativity Media to fund co-productions with Universal, representing 75% of U’s slate through 2015.
TECH TOOLS: Blackberry, iPhone
TOP CAUSE: Reforming drug laws
ROLE MODEL: Grandfather, “one of Idaho’s last true cattlemen”