NEW YORK — Artisan Entertainment Tuesday announced a financing deal that could provide up to $600 million over the next three years for film production and advertising.
The $200 million revolving credit facility will also clean up the indie’s balance sheet ahead of a possible IPO and free up cash for library or other acquisitions.
Housed in a new entity called Artisan Film Investors, the intricate credit facility will involve debt and equity financing as well as insurance protection. It will be backed by individual and institutional investors, insurance companies and banks. It’s one of very few such arrangements that fund both production and P&A, and it could be one of the industry’s last big insurance-backed deals as insurers shy away from film financing.
The insurance premium built into this deal resulted in higher interest rates, but Artisan CEO Mark Curcio said the facility is well worth the extra cost, since Artisan’s assets can’t be touched.
“It’s a validation of our ability to grow the company and position it as a mini-major,” Curcio said. Artisan will retain its previous $175 million facility, which “was geared to a much smaller company,” he added.
Investment banker John Miller of Chase Manhattan, lead manager on the debt portion of the new facility, said that “no one, outside a select group of major studios, is getting these kinds of complex transactions completed.”
Artisan has grown rapidly, from revenues of about $175 million in 1997, when current management entered the picture, to an estimated $380 million-$400 million this year. Phenom “The Blair Witch Project” alone will contribute about a quarter of 1999 revenues, Curcio said.
The new credit facility clears the way for Artisan to begin exploring the possibility of raising additional capital, Curcio said. The indie has been pondering an offering of equity, debt or both, and an IPO is considered highly likely.
Artisan estimates annual production and P&A expenses will run about $160 million. The game plan is to turn out four to six movies a year, all costing under $30 million. “We have no intention of increasing the number of productions or making larger productions,” Curcio said.
Nor will Artisan use the cash for HBO, direct-to-video or other projects. “It’s just for wide-release movies,” he said. “Stir of Echoes” and “The Ninth Gate” are the first two films to fall under the facility. “Way of the Gun” and “Sole Survivor” are the next two. The facility calls for a minimum of eight movies.
Equity for the AFI fund was placed by Bear Stearns and insurance provided by a syndicate set up by Heath and Co. with Peter Hoffman. Chase Securities structured the film fund’s debt component, which was raised through a consortium of banks led by Chase Manhattan and Fleet, with contributions by Societe Generale and Banque Nationale de Paris.