Bill Mechanic’s Pandemonium production shingle, formed in September 2000 after he resigned as chairman of Fox Filmed Entertainment, is closing in on a financing deal.
Coin is being pieced together by investment bankers at CIBC, with approximately $370 million in debt and equity financing secured to fund 15 to 20 movies over the next five years. Deal is expected to close in as little as 90 days.
Attorney Alan Levine of Ziffren Brittenham Branca & Fischer structured the new Mechanic deal. He also served as the architect of Joe Roth’s Revolution Studios-Sony deal and the similarly Disney-based production deal for Armyan Bernstein’s Beacon shingle.
Mechanic has a separate arrangement at Disney for prints-and-advertising funding.
Some of the projects on Mechanic’s slate include:
- David Hubbard’s adaptation of British novelist Carole Matthews’ “For Better, for Worse.”
- “Murphy Brown” creator Diane English’s untitled female heist pic about casino robber Heather Tallchief, originally penned by Richard Regen.
- A remake of “Dark Water,” a Japanese thriller that was produced by Taka Ichise and helmed by “Ringu” director Hideo Nakata.
- John Woo project “The Divide,” an epic adventure that was to be directed by Woo and star Nicolas Cage and Chow Yun-Fat. It’s been rewritten by feature scribe Christopher McQuarrie (“The Usual Suspects”).
Revolution the model
Mechanic, who declined to confirm the deal, has been working for almost three years to put his company together, roughly modeled after Roth’s Revolution, which was set up in 2000 on the Sony lot.
Unlike Revolution, Pandemonium will not be part-owned by a studio parent, though it does carry a five-year, exclusive distribution and P&A pact with Disney to help bolster the studio’s slate and balance risk.
Under the terms of that pact, inked in December 2001, the Mouse House puts up a small share of the production costs plus P&A on Pandemonium’s 20-pic slate.
Pandemonium’s slate and corporate financing involves three tiers of funding. Headed into the home stretch, there will likely be $250 million in senior debt, $65 million in equity investment from private financial entities and $55 million in high-yield debt.
CIBC would carry a substantial chunk of the senior debt.
The $250 million component is structured as a five-year revolving slate securitization, fashioning projected slate revenue into commercial paper.
Total: $1 billion
Because the securitization would be replenished over the course of its term, that component of the Pandemonium financing alone could potentially fund as much as $1 billion in production.
CIBC will carry a big chunk of the $250 million and syndicate the rest through a group of other lenders, with briefing books set to circulate in mid-June.
A letter of intent has been signed by various parties interested in participating in the equity portion of the financing. Those parties are conducting due diligence before a final commitment.
Deal ‘95% certain’
A key source suggested the arrangements are “95% certain” of closing in the next few months.
CIBC’s efforts are being led by Britt Fletcher, managing director of the firm’s Gotham-based media finance unit. A rep of the firm declined to comment on the financing.
Deal is as much a watershed for CIBC as for Mechanic, for while the bank has been involved in several other entertainment financings over the years, it has seldom led major fundings — other than a recent one for key client Village Roadshow. (In February, CIBC closed on $1 billion in Roadshow financing based on Oz producer’s continuing relationship with Warner Bros.)
Mechanic’s quest for coin hit a number of speedbumps over the last three years, including the bursting of the Internet bubble, the economic uncertainties post-9/11 and the collapse of foreign equity markets like the German Neuer Markt. The bar, however, was set considerably lower a few years ago when an average of 60%-65% of a film’s budget could be guaranteed by foreign sales.
Today, no one expects to see much more than 50% out of foreign markets, and that has made banks — like JPMorgan Chase, which passed on the Pandemonium pact — nervous enough to balk.
These days, banks need to see equity — ironically, the very sort of large cash reserves that if studios had more of in the first place, companies like Mechanic’s would be unneeded.
The company’s development slate also includes:
- “Zillion,” penned by Dwayne Alexander, about fictional billionaire and super-sleuth Matthew Zillion, who teams up with a no-nonsense female New York City detective to crush an international drug ring.
- Comicbook heavyweight Neil Gaiman’s best-selling illustrated kids suspense story “Coraline,” with Henry Selick (“The Nightmare Before Christmas”) directing from his own adaptation.
- The Moon and the Sun” (aka “Mermaid”), which Gregory Hoblit will direct from a screenplay by Laura Harrington and James Schamus. Natalie Portman was attached to star.
Imminent move also dovetails with a Disney strategy of buttressing its slate.
In December, Armyan Bernstein’s Beacon shingle signed an overall five-year production and distribution deal with Walt Disney Studios, with the non-exclusive arrangement including co-financing, production and distribution components.