For months, Hollywood has been buzzing about whether superstar director Steven Spielberg could get a loan. Since October, when he broke away from Paramount Pictures to launch a studio with his longtime producing executive Stacey Snider, the director of such lucrative franchises as Indiana Jones, Jaws, and Jurassic Park has been stymied by the worldwide credit crisis. Now, after some serious restructuring efforts by bankers at JPMorgan Chase (JPM), Spielberg finally seems assured of getting his money.
Financial industry sources say the $325 million in bank commitments for Spielberg's new studio, which retains the DreamWorks name, will likely close in mid-May. The debt had been expected earlier this year, but had been delayed.
But getting money, even for Hollywood's most bankable director, didn't come without strings. These sources have confirmed that to get the loan the new DreamWorks was forced to reduce the risk to banks to unheard-of levels. As part of the new debt agreement, Spielberg and company will be required to put up half the money for each film that it puts into production—much more than the 20% or less that studios traditionally have put up when they have bank lines to cover the rest. There is also a provision, still not fully fleshed out, that might require DreamWorks to put up more money under specific circumstances if the film doesn't hit certain targets, according to one source who has seen the loan documents. DreamWorks would not comment on the pending loan.
The loan that is being shopped among banks by DreamWorks' bankers at JPMorgan Chase is a far cry from the $700 million in loans that Spielberg and Snider had sought in September, when they announced plans to raise $1.2 billion that would include $500 million in equity from India's Reliance ADA Group. The credit crisis hit not long after that, forcing Spielberg's financial advisers to slash the amount of money they hoped to raise. Reliance now will match the $325 million in bank lines raised by the studio. In the meantime, Reliance and Spielberg have each contributed cash—said to approaching $60 million apiece—to keep the studio in operation and buying new projects until the loan is secured.
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JPMorgan, which has committed to putting up $75 million, is said to have already lined up commitments for parts of the DreamWorks loan from banks that traditionally have contributed small pieces to Hollywood deals—maybe $10 million to $15 million apiece—from Comerica (CBA), City National Bank (CYN), and Israel Discount Bank. JPMorgan is also said to be close to signing on one of its longtime partner banks, Wachovia, now a part of Wells Fargo (WFC). In addition, Walt Disney Co. (DIS), which agreed in February to distribute the six or so films DreamWorks will release each year, is providing a $75 million line of credit, according to knowledgeable sources. Neither Disney nor JPMorgan would comment.
Meanwhile, the new DreamWorks is busily putting other projects into place while it awaits its financing. The studio plans to begin production with Paramount soon on a comedy starring Steve Carell and Paul Rudd called Dinner for Schmucks that the two studios agreed to jointly share after Spielberg ended a stormy three-year association with Paramount (VIAB). To help finance that picture, the two production companies brought in another money source, Spyglass Entertainment. In addition, Spielberg just finished directing The Adventures of Tintin, a special effects film based on the Belgian children's comic book that he is making with producer Peter Jackson for Paramount and Sony (SNE), which jointly financed it. Spielberg has yet to announce his next project, although he has been working on a project about Abraham Lincoln that is expected to star Liam Neeson as the 16th President.
Grover is Los Angeles bureau chief for BusinessWeek.