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Hollywood production companies show signs of financial strength

Jan 16, 2013

It’s always thrilling to end the calendar year with box-office revenues beating the prior year. What looked like an off year with a shaky summer season turned out to be the best ever in North America, with revenues of $10,835 billion. This is a 6.5 percent increase over the prior year. Even better news is that attendance jumped 6.4 percent to 1.364 billion.

Yes, there is more competition than ever from cable, Blu-ray, broadcast, video-on-demand, et al. and piracy still is a major problem, but we’ve witnessed so many times that good films do well at the box office. And 2012 brought three films that surpassed $400 million and another seven that scaled the $200 million barrier. There were several surprises including The Avengers doing $623,357,910 in North America; the largest grossing Bond ever, Skyfall at $290,904,271; and the raunchy comedy Ted that passed $215 million.

All of this good fortune has made it possible for many companies to raise more funds for production, to refinance and to reward stockholders. Let’s take a look at some of this upbeat news:

* Relativity Media has raised $150 million in equity from some 10 investors, including new dollars from existing backer Ron Burke. The deal gives the financiers roughly 9% of the company and will be used for expansion and growing China-based operations.
Relativity is valued at $1.7 billion—a number which covers the company’s assets, approximately $350 million of debt, and assumed future value. Relativity’s operations include a film division, sports business, a TV production arm, and an investment in China-based production studio SkyLand.

* Legendary Entertainment raised $443 million in equity, reinforcing its reputation as one of the most strongly capitalized production houses in Hollywood. The company raised the funds through venerable investment firm Waddelll and Reed Financial, a company not widely known for its entertainment activity. Legendary will now reportedly transition out of co-financing movies with Warner Bros. and focus on developing its own slate, though Legendary and distributor WB are expected to continue their relationship. Investors valued Legendary at $2.5 billion after the new cash infusion.

* Following the success of The Hobbit and Skyfall, MGM is refinancing its debt in a pact that will give the fabled studio more financial flexibility than it’s had in years, including the chance to invest more in its own films and explore new media acquisitions.

JP Morgan is overseeing the effort to increase MGM’s current credit line from $500 million to about $650 million. Banks and other lenders, including Bank of America and Royal Bank of Canada, have arranged more than $600 million in commitments. MGM will use the money to pay back its studio partners, who have advanced the company funds to co-finance its recent projects.

* Village Roadshow finalized its $1.125 billion debt facility, the largest deal of its kind in years and a huge boost for one of Warner Bros.’ most essential partners. JPMorgan and Rabobank oversaw the plan, which refinanced an existing billion-dollar debt facility. The refinancing puts an end to persistent questions about Village’s access to money. In recent years, the company has brought as few as two movies per year to WB, after helping the studio co-finance the Matrix franchise and other hits.

* Shares of Lionsgate reached an all-time high after an analyst raised his price target, the robust performance of The Twilight Saga: Breaking Dawn—Part 2 and the resolution of the “fiscal cliff” conflict. The current quote of $16.88 topped the previous high of Nov. 29, and is almost double the $8.60 price on Jan. 13, 2012, when Lionsgate bought Summit Entertainment for $412.5 million.

The final Twilight film reached $800 million in worldwide grosses in less than two months—nearly $100 million above Breaking Dawn—Part 1—with $286.5 million in North America and $514 million internationally.

With additional funding being used to make new films, we believe the industry is healthy and in the short term has a terrific future.


Hollywood production companies show signs of financial strength

Jan 16, 2013

It’s always thrilling to end the calendar year with box-office revenues beating the prior year. What looked like an off year with a shaky summer season turned out to be the best ever in North America, with revenues of $10,835 billion. This is a 6.5 percent increase over the prior year. Even better news is that attendance jumped 6.4 percent to 1.364 billion.

Yes, there is more competition than ever from cable, Blu-ray, broadcast, video-on-demand, et al. and piracy still is a major problem, but we’ve witnessed so many times that good films do well at the box office. And 2012 brought three films that surpassed $400 million and another seven that scaled the $200 million barrier. There were several surprises including The Avengers doing $623,357,910 in North America; the largest grossing Bond ever, Skyfall at $290,904,271; and the raunchy comedy Ted that passed $215 million.

All of this good fortune has made it possible for many companies to raise more funds for production, to refinance and to reward stockholders. Let’s take a look at some of this upbeat news:

* Relativity Media has raised $150 million in equity from some 10 investors, including new dollars from existing backer Ron Burke. The deal gives the financiers roughly 9% of the company and will be used for expansion and growing China-based operations.
Relativity is valued at $1.7 billion—a number which covers the company’s assets, approximately $350 million of debt, and assumed future value. Relativity’s operations include a film division, sports business, a TV production arm, and an investment in China-based production studio SkyLand.

* Legendary Entertainment raised $443 million in equity, reinforcing its reputation as one of the most strongly capitalized production houses in Hollywood. The company raised the funds through venerable investment firm Waddelll and Reed Financial, a company not widely known for its entertainment activity. Legendary will now reportedly transition out of co-financing movies with Warner Bros. and focus on developing its own slate, though Legendary and distributor WB are expected to continue their relationship. Investors valued Legendary at $2.5 billion after the new cash infusion.

* Following the success of The Hobbit and Skyfall, MGM is refinancing its debt in a pact that will give the fabled studio more financial flexibility than it’s had in years, including the chance to invest more in its own films and explore new media acquisitions.

JP Morgan is overseeing the effort to increase MGM’s current credit line from $500 million to about $650 million. Banks and other lenders, including Bank of America and Royal Bank of Canada, have arranged more than $600 million in commitments. MGM will use the money to pay back its studio partners, who have advanced the company funds to co-finance its recent projects.

* Village Roadshow finalized its $1.125 billion debt facility, the largest deal of its kind in years and a huge boost for one of Warner Bros.’ most essential partners. JPMorgan and Rabobank oversaw the plan, which refinanced an existing billion-dollar debt facility. The refinancing puts an end to persistent questions about Village’s access to money. In recent years, the company has brought as few as two movies per year to WB, after helping the studio co-finance the Matrix franchise and other hits.

* Shares of Lionsgate reached an all-time high after an analyst raised his price target, the robust performance of The Twilight Saga: Breaking Dawn—Part 2 and the resolution of the “fiscal cliff” conflict. The current quote of $16.88 topped the previous high of Nov. 29, and is almost double the $8.60 price on Jan. 13, 2012, when Lionsgate bought Summit Entertainment for $412.5 million.

The final Twilight film reached $800 million in worldwide grosses in less than two months—nearly $100 million above Breaking Dawn—Part 1—with $286.5 million in North America and $514 million internationally.

With additional funding being used to make new films, we believe the industry is healthy and in the short term has a terrific future.

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