From the Financial Times:
Credit crunch hits $1bn MGM finance plan
By Matthew Garrahan in Los Angeles and James Politi in New York
The credit crunch shaking world markets has hit Hollywood after Goldman Sachs and Deutsche Bank, which were trying to raise up to $1bn to finance films for Metro-Goldwyn-Mayer, withdrew their commitment to underwrite the deal. Bringing in private equity, hedge fund and institutional investors to fund “slates” of several films has become a popular way for Hollywood studios to spread the risk attached to production.
But with credit markets tightening, the attempt by the banks to raise $700m-$1bn for MGM productions and co-productions has been blown off-course, according to people close to the situation.
The financing would have provided funds for films including The Hobbit, an MGM co-production with New Line Entertainment, and the fourth instalment in the Terminator franchise. It is also likely that funds would have gone towards the next James Bond film, an MGM coproduction with Sony.
Goldman declined to comment and Deutsche did not return calls. The financing has not been abandoned, however, with the banks believed to have moved from an underwriting commitment to a “best efforts” commitment to complete the financing.
But the underwriting withdrawal amid a broader credit crunch means the deal will be delayed. It is unclear when it will be revived.
MGM also declined to comment. However, the studio is understood to be relaxed about the delay because none of the films in line to receive funds from the financing is due to start production imminently.
You can read the rest of the article at the link above — but it’s gotta be bad when Bond films no longer seem like safe investments.
This brings up interesting questions for the strike negotiations: Would producers actually want a strike now, in order to “shed” less desirable productions, thin payrolls, etc.?
Will Hollywood workers want to force a shutdown in a climate where even a Bond, Hobbit, or Terminator flick has to scramble for its budget? (And therefore, the jobs those films would provide?)
Curiouser and curiouser….
