NEW YORK — Dutch bank ABN-Amro has taken the lead in arranging a $400 million production loan for New Line Cinema, fulfilling Time Warner’s plans to raise production finance for New Line without affecting the entertainment giant’s balance sheet.
As expected, the loan is specifically a New Line deal and won’t appear on the balance sheet of its parent, Time Warner, and the entertainment giant won’t be liable for repayment, sources said. Time Warner inherited New Line in its acquisition of Turner Broadcasting Systems last year but has wanted the company to finance its production needs separately to allow TW to keep a lid on its capital spending.
ABN, which has committed to lend the money and is now working to syndicate the loan, held a meeting with interested banks Monday to explain the structure of the deal.
Sources said the loan will have a life of almost four years, financing New Line’s production over that time on a revolving basis. New Line produces about 15 films a year.
ABN’s role as lead bank on the deal is somewhat surprising, as the bank has historically had little presence in the entertainment industry. Its role in the New Line deal is a sign that the bank plans to be more aggressive in film financing, bankers said.
ABN-Amro execs working on the deal could not be reached for comment Wednesday and neither New Line nor Time Warner would comment.
Also surprising is the absence from the deal of Chase Securities, a big lender in the film industry, which historically has been New Line’s lender and was expected to be the main banker on this facility. It is not known why Chase isn’t doing the deal, but Chase may still end up with some role in financing New Line, sources said.
New Line and Time Warner are believed to be considering arranging another facility which would fund the purchase of New Line’s completed pictures in a deal similar to that arranged by 20th Century Fox, Universal Studios and Polygram Holdings. Chase may be involved in arranging this facility, which is designed to give New Line more financial flexibility. Chase execs could not be reached for comment.
The second facility would be a hedge on New Line’s future performance, however, and sources said it is not certain the deal needs to be done. Assuming New Line’s films perform, the revenue from the pictures would repay the facility.
Banking sources say ABN’s facility is very straightforward and is effectively a pickup facility. A special-purpose vehicle will tap the commercial paper market to finance New Line’s productions, and New Line has committed to buy the pictures from the special purpose vehicle when complete.