The day after news broke that Paula Wagner was bolting from United Artists, MGM chairman and CEO Harry E. Sloan sent out a statement making sure that everyone got the message that MGM is happy to be in business with Wagner’s UA partner, Tom Cruise.
“I would like to clarify that we are honored that he will continue as our full partner in control of UA,” Sloan stated.” He is in the middle of one of the greatest careers our industry has ever seen and one that will continue at the top of United Artists Entertainment.”
Sloan tried to remedy on Tuesday what he should have made clear on Monday because several news reports suggested that UA was losing its $500 million credit facility from banker Merrill Lynch. That’s because Merrill Lynch could decide to snatch that debt away.
The deal could end now because Cruise and Wagner have failed to make certain benchmarks. In short, they have not greenlit enough movies.
The problem on the one hand was that Wagner was reluctant to pull the trigger on some movies that she felt weren’t ready to go. On the other, Sloan apparently balked at committing marketing dollars — the only control he had over movies that cost less than $60 million — to some of the movies that Wagner did want to make.
When Merrill Lynch got into business with Cruise and Wagner, the world was a different place.
Cruise was the biggest movie star in Hollywood, with “The War of the Worlds” and “Mission: Impossible III” behind him. When he made a presentation to the Merrill Lynch team, they were wowed. Credit was easy and flowing. The movie business was an attractive lure for investors, who were piling into the entertainment sector in droves.
The sober light of August 2008 is another time and place. Cruise now has the money-losing “Lions for Lambs,” starring himself and Robert Redford, behind him, as well as the upcoming $85 million period drama “Valkyrie,” starring Cruise as an eye-patched Nazi. After several postponements, the long-delayed movie will open Dec. 26.
Luckily, Cruise has earned some positive buzz for his cameo as a foul-mouth producer in “Tropic Thunder,” which is doing business.
Credit is harder to get now, as investors run from the Hollywood Hills. And the industry is betting that Merrill Lynch exec Eric Alini, who is the point person on Merrill Lynch’s investments in UA, Summit Entertainment and Coldspring Pictures, among others, will extricate Merrill Lynch from this deal.
On the basis that UA was supposed to deliver two to four movies a year over 15 to 16 movies, UA could be in breach of its covenants, as it needed to meet certain milestones in terms of financing. Wagner only delivered two films over two years.
Merrill Lynch is “in it for the long haul,” insists one MGM exec.
Sloan is hoping to continue to make films under the credit facility. According to MGM, films will be made under Cruise’s continued “guidance” and Wagner will still produce most of them. The expectation going forward is that new MGM prexy Mary Parent will take charge of speeding up UA’s production, now headed by Don Granger.
Parent has been able to aggressively jump-start more projects since she arrived at MGM just four months ago than Wagner has done in two years — she’s reviving library tentpole titles “RoboCop,” “Fame” and “The Pink Panther,” starting a new Robert Ludlum franchise and, on a more modest scale, remaking “Red Dawn.”
Parent has said that she would never have gone to MGM without assurance that there would be significant money to produce and release these movies. MGM execs insist that a new deal for $500 million to $600 million will close in several weeks.
Sloan could either lose his UA money, or raise his MGM money, or lose both.