Capital bump for D’Works

Studio reups coin; Allen backing remains firm

DreamWorks is finalizing a major $1.5 billion refinancing of its capital base.

Currently, DreamWorks has a $1 billion revolving credit line with J.P. Morgan and a $500 million slate “securitization” involving J.P. Morgan and a host of other lenders. (Securitizations create investment vehicles from anticipated slate revenue.) Keying on certain market conditions — and even though the credit line doesn’t expire until June 2003 — the studio is rejiggering those arrangements.

Though lenders declined comment, it’s expected that when the refinancing is completed, DreamWorks will use only a $500 million credit line but raise its slate securitization to $1 billion. J.P. Morgan would continue to lead both financings, with FleetBoston Financial, among other lenders, also participating in the process of securitization.

Meanwhile, DreamWorks adamantly denied a report that key investor Paul Allen is set to dump his minority stake in the company.

“The reports that are out there that Paul Allen is interested in selling his DreamWorks stake is categorically untrue,” DreamWorks chief financial office Ron Nelson said. “His commitment to this company remains as firm as when he made his investment.”

A spokesman for Vulcan Inc., a holding company for Allen’s investments, issued a similar statement.

“DreamWorks has been a key part of our portfolio and continues to be so,” spokesman Michael Nank said. “Any rumors to the contrary are false, and Mr. Allen has no intention of selling his stake in DreamWorks.”

Referring to a Wednesday article in the New York Post suggesting Allen’s plan to exit, DreamWorks spokeswoman Terry Press deadpanned, “It had all the factual accuracy we have come to expect from the New York Post.”

Some industry-ites consider an Allen exit strategy possible eventually, but only when — or if — DreamWorks finally enters into a strategic alliance with another entertainment company. The studio has staged repeated, if aborted, trips to the merger altar in recent years.

There’s a lingering notion that the pure-play film studio would do well to attach to another entertainment company, as such an alliance would tap into the sorts of biz benefits possible only through a more vertically integrated corporate structure.

Over the past few years, DreamWorks has had at least three prospective merger discussions with other entertainment companies. As in previous situations with EMI and Seagram, recent talks with MGM collapsed primarily over issues of valuation, sources said.

Asked whether the company may look to size up via a strategic partnership of some sort, DreamWorks’ Nelson said: “We think we’re well-positioned to prosper as a stand-alone company, because we have an abundance of capital and are profitable. But at the same time, I think we’re also well-positioned to be part of any number of ongoing consolidation initiatives under way, because of the performance of the company and the quality of the management.”

For the time being, he said, “We are in the course of doing a routine refinancing of the company.”

After the dust settles on that process, Allen would continue to have a roughly 30%-35% stake in the studio. It’s believed the ownership interest of studio principals Steven Spielberg, Jeffrey Katzenberg and David Geffen amounts to another 60%-69%, and various other parties also will continue to hold small stakes.

Allen’s investment in the studio over the past eight years is north of $700 million. The principals’ stake stems from an original $100 million apiece they contributed in founding the studio in 1994.

Allen’s other investments include a controlling stake in cabler Charter Communications. He recently announced moves to sell off holdings in Barry Diller’s USA Networks media group to focus more tightly on cable-system operations.