Chillin' out till it needs to be funded
The global credit crisis has roiled the country, but in Hollywood the stars are still spending. Along with Reliance Big Entertainment, filmmaker and DreamWorks SKG co-founder Steven Spielberg wrote a $26.5 million check this week to Paramount Pictures.
Mr. Spielberg and DreamWorks Chief Executive Stacey Snider last fall left Paramount in order to launch a film company, with funding from Reliance, one of India’s largest conglomerates.
As part of an extensive corporate divorce agreement, the name “DreamWorks” and much of its staff went with Mr. Spielberg and Ms. Snider to their new venture.
But Viacom’s Paramount has retained other DreamWorks assets, such as the right to remain involved in any projects the company puts into production this year. The newly independent DreamWorks also had to pay for 17 movie projects it wanted to take from Paramount to the new company–hence the $26.5 million check Mr. Spielberg just signed. DreamWorks owes an additional sum to Paramount, between $3.5 million to $8.5 million, to cover overhead for producers and screenwriters working on those projects.
Hollywood insiders are touting the check as a sign that plans for the film venture are proceeding. Those plans came into question at the end of 2008, when the turmoil in the global credit markets slowed J.P. Morgan Chase’s attempts to raise the $700 million to $750 million in debt the new DreamWorks wanted. Reliance had agreed to provide Mr. Spielberg and Ms. Snider as much as $550 million in equity, but only as they had raised an equal amount in debt financing.
Now, Reliance and DreamWorks are both saying they are confident the money will come through, if at a slower pace. J.P. Morgan plans to raise at least $325 million of the $700 million to $750 million by the end of the first quarter, which Reliance will match for a combined total of at least $650 million.