Sony Closes Co-Finance Deal With Citigroup and Lone Star

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Sony Pictures Entertainment has closed a $200 million slate deal, co-financed by LStar Capital, a credit lending affiliate Lone Star Funds, and Citigroup. Ben Waisbren, formerly of Virtual Studios, was the broker behind this deal, according to sources. Andrew Gumpert and Stefan Litt worked the deal on behalf of Sony.

The multi-year agreement closed Tuesday, and the $200 million includes both equity and bank debt to be applied to Sony’s upcoming slate including “22 Jump Street,” with Channing Tatum and Jonah Hill, “Think Like A Man Too,” “Sex Tape,” with Cameron Diaz and Jason Segel, “The Equalizer” with Denzel Washington  and “The Interview,” to name a few.

The studio had previously been in talks with Blue Anchor Entertainment and was looking to raise more $350 million-$400 million in equity and another $300 million in bank debt. Those discussions never resulted in a deal. John LaViolette did not immediately return a request seeking comment.

Sony has been on the hunt for a new financing partner since the studio’s deal with Relativity Media ended in 2011. That deal provided the studio with more than $500 million.

According to sources close to the deal, this new co-financing arrangement includes a mezzanine-financing component and is more reminiscent of deals made by banks prior to the economic downturn, but it’s unprecedented at this time to have a bank underwrite that kind of capital. In fact, this Citi and LStar deal is high risk for all parties involved and can been seen as a risk performance arrangement, which largely disappeared post financial crisis of 2008.

Waisbren, an architect of this agreement, lost his position at Virtual Studios in 2006 after designing a co-financing deal where Virtual invested $528 million in six Warner Bros. films that yielded unimpressive returns, including “V for Vendetta,” (which grossed $85.6 million domestically but less than that in overseas) and cost more than $50 million to produce. Likewise, “Poseidon” opened to just $22.1 million but cost $160-million to produce plus tens of millions more in marketing costs. Stark Investments, the primary hedge fund behind Virtual, was on the hook for half of “Poseidon”’s costs.

Lone Star, based in Texas, represents funds worth $45 billion.  

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  1. EK says:

    Sadly $200 million gets you nothing these days, especially if you are in the tent pole business like Sony has to be.Must be more to this otherwise it is a non story.

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