Warner Bros. distribution pact extended through 2017
Village Roadshow has closed the $1.125 billion debt facility that Variety first reported last month, the largest deal of its kind in years and a financial revitalization of one of Warner Bros.’ two most important partners.Transaction (Daily Variety, Oct. 15) closed just days before Village announced Monday that it had renewed its distribution deal with Warner Bros. through 2017. JP Morgan and Rabobank closed the structure, which refinanced an existing billion-dollar debt facility. The goal was to reach $1.1 billion that would give Village more flexibility to make movies than it’s had in years. Refinancing removes any uncertainty about Village’s access to cash — an issue which has plagued the company in years past. The L.A.-based arm of Oz’s Village Roadshow Entertainment Group faced severe liquidity issues after the financial crisis hit in 2008, hurt both by macro-economic conditions and the ratings downgrade of its insurance backer, Ambac. WB even had to cover the production costs for four Village titles including “Get Smart” and “Gran Torino” until Village could pay the money back. All in all, the company has fed as few as two movies per year to WB since 2009, after helping WB co-finance “The Matrix” franchise and “I Am Legend.” Village’s deal doesn’t give it access to all $1.125 billion at once, but it puts the company on more sturdy financial footing at a fortuitous time for Warner Bros. Legendary, with whom WB has a distribution deal through 2013, has increasingly focused inward: The two companies, which have partnered on 24 released films, have no projects lined up to co-finance past next year after “Jack the Giant Slayer,” Superman reboot “Man of Steel,” “300: Rise of an Empire” and “The Hangover Part III” are released. As credit markets slowly unthaw for Hollywood, the new five-year deal shows just how much support Village has from the institutional and bank markets. It’s the largest transaction of its kind since Viacom’s $2 billion facility in 2010; and eclipses Lionsgate’s $800 million deal in September. A production facility means that some banks are willing to take on a small amount of production risk — an almost unheard-of feat in the current climate. But lenders also like Village’s healthy library of more than 60 titles, which include the “Sherlock Holmes” franchise, “The Lucky One,” “Gran Torino” and “Ocean’s Thirteen” — hits that balance out family misfires like “Happy Feet Two,” “Legend of the Guardians: The Owls of Ga’Hoole” and “Cats & Dogs 2: The Revenge of Kitty Galore” (The “Sherlock Holmes” pics alone have grossed more than $1 billion worldwide). New structure banks on previous titles and performance across Village’s upcoming slate, which includes “Gangster Squad” and “The Great Gatsby.” With the exception of Disney, all of the studios are on an aggressive hunt for outside capital. Most have major slate financing deals which have either expired or will do so soon. That’s led to an increase in the number of films which studios distribute for others, rather than finance themselves. Former Disney topper Michael Eisner recently inked a multi-year worldwide distribution agreement with Universal, for example, for films which Eisner fully finances through his Tornante investment company. And of the 16 films on Warner Bros.’ 2012 slate, only five were fully financed by the studio.
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