Destination Films closed its doors for good and pink-slipped all employees at the end of business Friday when the company was no longer able to meet payroll to continue operations.
It has yet to be determined how the company’s three remaining titles will be handled: “Slackers” starring Devon Sawa, “Buying The Cow” starring Jerry O’Connell and “Ring Of Fire” starring Kiefer Sutherland. All three were originally slated for the last quarter of 2000, but were pushed forward when the company no longer had the funds to cover their release.
Over the last year, Destination CEO Barry London has been spearheading an effort to assemble an equity base for the company. The company recently came close to achieving that goal with venture capital, investment from Microsoft and a commitment from Sony to continue Destination’s video output deal through Columbia TriStar Home Video. This would have subordinated its insurance debt and provided a more-appealing profile to banks that could provide a P&A fund. In the end, however, the company simply ran out of both money and time.
The production and distribution company was launched by Steve Stabler and Brent Baum in October 1997 with a $100 million bond issue backed by a syndicate of insurers. However, that business plan included no equity investment – a detail that became Destination’s Achilles heel when the shingle’s cash reserves began to run dangerously low.
Indeed, Destination’s business plan proved to be a cash-burning machine. Steep fees attached to the company’s financing reduced usable funds to $70 million, which now had to cover overhead for some 85 employees as well as production and distribution costs for a company that planned to release 12-15 titles a year. And while Stabler and Baum had intended to launch the company with an additional $100 million in the form of a revolving credit line, banks shied away from the equity-free company.
Destination paid its first two years of interest on the $100 million loan in advance via an escrow account. Those funds now exhausted, Destination’s first interest payment is due in April, with the five-year bonds due in October 2002. How those issues will be resolved remain to be seen in the weeks ahead.
Established to fill a void in the domestic distribution market for mid-budget, mass-market pics, Destination successfully created high profiles for its titles. These included “Bats,” “Drowning Mona,” “Eye of the Beholder,” “Thomas and the Magic Railroad,” “Whipped” and “Beautiful.” However, the films’ wide releases did not translate to box-office success.
A year after former Par vice chairman Barry London joined Destination, founder Stabler exited the company in November 1999. It was hoped that the remaining executive team would attract an equity partner.
Although a number of players kicked Destination’s tires, including Rockefeller heir Nick Rockefeller, none would commit. Destination’s name had been muddied by its insurance-backed financing – a move initially heralded as revolutionary but more recently associated with fiscal disaster.
With funds getting increasingly tight, last year video partner CTHV agreed to advance Destination P&A monies based on the new releases’ video guarantees. This deal kept the wolf from the door but also meant that, to some degree, Destination cannibalized its own revenue streams.
There were other disappointments as well. Destination greenlit and cast “The Wedding Planner,” only to be forced to sell the project to Sony when Destination did not have the necessary production funds. And while Destination did not have a library that would have helped maintain a consistent cash flow, the releases have been strong video performers.