As Hollywood moves to take advantage of loosening credit markets, Village Roadshow is refinancing its $1 billion debt facility in a bid to give the company more flexibility to make films.
Longtime lenders JP Morgan and Rabobank will co-lead the transaction, a five-year deal earmarked exclusively for film production. Village hopes the deal will allow it to rev up pic production to five to seven films per year after global credit crunch forced the company to scale back its efforts during the past few years.
Village, the L.A.-based arm of Oz’s Village Roadshow Entertainment Group headed by Greg Basser, wants to modestly expand its debt facility to $1.1 billion. To do so, it’s banking on future earnings for more than 60 previously released pics, including the “Sherlock Holmes” titles, “The Lucky One,” “Gran Torino” and “Ocean’s Thirteen.”
Rabobank confirmed it was working with JP Morgan on the deal. JP Morgan has a policy of not commenting on deals in the works. Village Roadshow declined to comment.
Entertainment lenders will meet with Village Roadshow execs in New York on Wednesday to hear the company’s presentation, according to sources close to the transaction.
Proposed deal is also designed to allow Village to leverage future earnings from upcoming pics including “The Great Gatsby” and “Gangster Squad.” The better the company’s new releases perform, the more money Village can access at any given time.
Refinancing builds on the success of Village’s most recent infusion of capital. In June, investment firm Trinity Opportunities Limited raised $275 million in new coin for its Australian parent company. That’s a positive sign to lenders, one that observers say could help the production shingle’s efforts to refinance and expand.
JP Morgan and Rabobank put Village’s current facility in place in 2010. But that deal came after the 2008 economic crisis and other factors had already put a strain on Village’s finances.
That year, ratings agency Moody’s downgraded Ambac, the insurance company which backed Village’s senior debt facility at the time. That displeased lenders, including many European banks which ended up leaving film financing altogether because of the macro-economic collapse.
All of this decreased Village’s access to its $1.4 billion debt facility, which forced the company to scale back film production. Warner Bros., Village’s longtime studio distributor, has released as few as two films a year from the company since 2009. WB even had to cover the production costs for four Village titles — including “Get Smart” and “Torino” — until Village could pay the money back.
Company has found success with its recent “Sherlock Holmes” releases, which have grossed about $400 million worldwide. But the shingle has struggled with its family fare like “Happy Feet Two,” “Legend of the Guardians: The Owls of Ga’Hoole” and “Cats & Dogs 2: The Revenge of Kitty Galore.”
Nonetheless, the company’s studio distribution pact and its parent company’s recent capital raise should help entice lenders that are slowly re-entering the entertainment space. Village will also take advantage of the loosening debt markets, as other major companies have done in the past year.
Lionsgate closed an $800 million facility in September, while Legendary, New Regency and MGM have all completed substantial transactions within the last twelve months.
Village’s next pic, Keanu Reeves’ directorial debut “Man of Tai Chi,” will unspool next year. Pic is a co-financing arrangement between Village Roadshow Pictures Asia and Universal, which will co-distribute the pic.