Spielberg Gets Funds For New Studio

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Steven Spielberg and business partner Stacey Snider said Monday that their new film company, DreamWorks Studios, has completed its initial financing and has $825 million available to make up to 21 movies over the next four years.

steven_Spielberg.jpgThe announcement came months later than expected as DreamWorks struggled to raise funding it needed to launch a new venture with Indian conglomerate Reliance ADA Group.

DreamWorks and financing partner J.P. Morgan Chase raised $325 million in debt financing, a figure being matched with equity by Reliance. Walt Disney Co., which will distribute the company's films, is contributing a loan for another $175 million.

Mr. Spielberg's battle to fund his new venture shows the challenges that even top Hollywood talents are facing. The billions of dollars that Wall Street poured into the film industry have dried up. "The past year was like balancing ourselves on a sea of rolling logs" Mr. Spielberg said of the process. "Thankfully, no one fell in."

The $325 million in debt financing that DreamWorks now has to work with is about half what Mr. Spielberg had initially hoped to raise when he announced his new partnership with Reliance a year ago. And it still represents only the first phase. DreamWorks hopes to raise a total of $550 million of debt that Reliance will match with equity.

DreamWorks decided to slow down the process after the credit crunch hit in November. By March, DreamWorks and J.P. Morgan Chase had raised only about half of the $325 million, according to people familiar with the negotiations.

Other investors, mainly international financial institutions, have approached Reliance about also investing in DreamWorks. While Mr. Spielberg's partnership with the Indian conglomerate may seem unusual, it is part of a broader trend in Hollywood, where the evaporation of Wall Street financing has opened the door to foreign investors.

In DreamWorks, Reliance has found a Hollywood partner that can help to expand its international presence. Reliance hopes many of the DreamWorks movies, especially new franchises, will appeal to a growing class of young people in India that prefer Hollywood fare to Bollywood movies.

Still, Mr. Spielberg's difficulties winning financing don't bode well for the rest of the film industry. Even before the financial crisis, many banks had scaled back their Hollywood investments sharply after failing to receive the sort of returns they had expected.

source:online.wsj.com




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  Posted on Tuesday, August 18th, 2009 at 1:55 PM under   Hollywood | RSS 2.0 Feed
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