As Relativity Media’s billion-dollar co-financing deals at Sony and Universal draw to a close, financial services company StormHarbour is one of several groups in the early stages of assembling a fund to back studio films.
Its goal is to raise as much as $1.2 billion in equity and debt to shop to the majors, with key targets being Sony and Universal.
Sources with knowledge of the potential fund caution that discussions are very preliminary: Storm-Harbour is in the fund-raising process, and neither Sony or Universal is in negotiations. The preliminary discussions also included media group Anton Capital Entertainment, which partnered with StormHarbour to back a $200 million fund for pan-European film group Studiocanal last year. However, some observers believe Anton may no longer be involved in current talks.
Reps for Anton, Sony and Universal declined to comment; StormHarbour did not respond to a request for comment.
New fund is one of many being discussed around town, as studios have increasingly come under pressure from corporate parents to share risk and reduce overhead. At the same time, capital markets have become tighter since the economic downturn of 2008, with equity harder to raise.
Sources close to the discussions say that if StormHarbour is able to raise the capital, it would likely be used for separate deals at the majors. With the Relativity-arranged Beverly I and Beverly II vehicles either done or almost finished financing films at Sony and Universal, both studios have actively discussed bringing in new money.
And while fund talk may be early, industry insiders say StormHarbour — a financial advisory firm with offices in London, Gotham, Hong Kong and other Euro and Asian cities — is closer than other groups that have come and gone through studio doors in recent months. Many investors have taken meetings, but few have materialized with the cash to back up a big-budget partnership.
Chinese funds, for example, have made more headlines than movies in the past year. While Hollywood is aggressively looking to break into the mainland marketplace, few high-profile announcements have yielded tangible partnerships or films, especially at the major or mini-major level.
And while investors from all over the globe court Hollywood on a regular basis, co-financing deals at the studios look a lot different than they did a few years ago.
Lawsuits, the credit crunch and slipping homevideo numbers have made expensive slate arrangements less palatable. Instead of half-billion-dollar pacts that blindly fund dozens of pics, many investors have put together smaller pacts with studios for select films.
In August, equity fund Hemisphere partnered with Sony for three of the studio’s tentpoles (one of which was co-financed by Paramount as well), while David Ellison’s Skydance Prods. pacted with Paramount in 2009 for select big-ticket tenptoles.
Beverly II, which Relativity arranged at U in 2008 with backing from hedge fund Elliott Management, will fund films greenlit through the end of 2012, although the overall deal expires in 2014.
Under terms of the arrangement, Elliott funds about half the budgets of 75% of U’s films each year. And while U had some home runs in 2011, like “Fast Five” and “Bridesmaids,” Elliott smarted from a number of disappointments, including “Cowboys and Aliens.” Beverly II didn’t participate in “Fast Five,” which grossed more than $600 million worldwide.
Relativity arranged Beverly I at Sony in 2007. It funded more than 17 films, including hits like “Salt,” “The Social Network” and “Grown Ups,” through that arrangement, although the package also included misfires like “Did You Hear About the Morgans?”