HOLLYWOOD DUMPS FILM DEALS ON WALL STREET INVESTORS

BY SUE ZEIDLER

LOS ANGELES - The financial crisis is forcing Wall Street banks and hedge funds to pull out of billions of dollars worth of film deals, opening the door for specialty investors to scoop up Hollywood assets at discount prices.

From 2005 to 2008, hedge funds partnered with all the major banks from Merrill Lynch to Lehman Brothers to pump an estimated $15 billion (10.63 billion pounds) into films, taking on risks formerly absorbed by studios like Sony (6758.T) Pictures and News Corp’s (NWSA.O) 20th Century Fox in return for a share of profits.


Typically, investors help finance “slates” of as many as a dozen movies and collect their returns after the films are released, or start to generate DVD and television revenue, which could be years from their initial investment.

But after some box office duds, such as Tom Cruise’s “Lions for Lambs,” and the credit freeze, most banks with the exception of JPMorgan (JPM.N) have reduced their presence in Hollywood. Some are trying to sell off their positions in slate deals for discounts of 30 percent to 70 percent.

“Because of the credit crisis, banks and hedge funds have been writing down securities, including those backed by film assets, and are willing to sell them at lower prices,” said Stephen Prough, founder of Salem Partners, which advises investors on how to maximize film investments.


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FEWER FILMS

With these deals, many studios have enough financing to make movies through 2010 and are cutting costs while waiting out the credit freeze to thaw before seeking further funding.

Nonetheless, the number of films released by major studios are expected to continue to decrease to correct an oversupplied market. Less than 200 films are slated to hit theatres in 2009, down from about 219 major studio releases in 2008 and 236 in 2007, according to industry estimates.

“There was too much money and too many films. The market couldn’t sustain it and the competition was too great to provide the returns the equity and hedge funds were looking for,” said PriceWaterhouseCoopers Managing Director Ron Cushey.

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http://www.sanfranciscosentinel.com/?p=20094


Looks like realty sets in with the exception of JPM of course.