Burke
Berman
Australia's Village Roadshow Ltd. has just reloaded its film production vehicle to the tune of $1 billion.
The Aussie entertainment giant closed a deal Wednesday local time for a revolving fund of $1 billion that will enable L.A.-based Village Roadshow Pictures to half-finance another 40 films with Warner Bros.
Most immediately, VRP now has the cash to part-bankroll "The Matrix" sequels "The Matrix Reloaded" and "The Matrix Revolutions," which were outside the budget cap of its previous $750 million credit line with 10 international banks.
The refinancing and the simultaneous extension through 2006 of its co-venture with WB signal a decisive shift in focus for a company that has long been exhib-driven.
"Exhibition is a steady-as-she goes, good cash flow business for us, and we're reducing the number of territories in which we operate from 10 to 6-8," VRL managing director Graham Burke told
Daily Variety. "The growth vehicle now is production. It's what we see as the big horizon of our future."
The new deal strengthens a five-year relationship with WB that encompassed 30 films that included such hits as "The Matrix," "Ocean's Eleven," "Analyze This," "Miss Congeniality" and "Training Day."
While it will continue to partner in WB films at the rate of six to eight per year, VRP will no longer be precluded from cofinancing WB films with budgets over $90 million.
Also, VRP is partnering with WB on "Troy," the Wolfgang Petersen-directed epic adaptation of "The Iliad" that will star Brad Pitt as Achilles and Eric Bana as Hector, as well as the Jennifer Lopez-starrer "Taking Lives." "Catwoman" is among several possibles to bolster that slate. Films like the Richard LaGravanese-scripted time travel comedy "Replay," which has Julia Roberts attached, are also skedded.
The new facility is a revolving $900 million fund from six banks led by CIBC, and $100 million in equity from Village Roadshow.
In total, the Aussie firm is investing $168 million in its production unit, which also entails buying out the outside partners in Village Roadshow Films, the entity which had the previous credit line. In effect, VRL has taken full control of its film financing operation, which now becomes an on-balance sheet fixture.
It's taken 10 months to put together the financial package, during which time VRL's stock price has languished. "This is a welcome announcement which clears up the uncertainty," says Peter Davey, managing director of Granada Prods, speaking on behalf of Granada, VRL's biggest indie shareholder with a 17.9% stake.
Burke will not comment on "The Matrix" sequels' reported combined budgets of $300 million but is super confident about those films, declaring, "From what I have seen of 'Matrix 2,' that investment will come back to us breathtakingly quickly."
VRP's emergence began five years ago, shortly after it named as VRP chairman-CEO Bruce Berman, and empowered the former WB production president to seed production financing in WB films while he developed homegrown productions. VRP found itself in a crowded field at the time, with Bel Air, Morgan Creek and Alcon all jockeying for WB product.
Berman had the advantage of having developed as an exec many of the projects that were ready to go into production. VRP wagered smartly on films like "The Matrix," and VRP has gone on to become the highest volume cofinancing and producing partner for WB. VRP execs have become hands-on partners in the development and creative decisions of the WB films it stakes. In a half decade, VRP has emerged as one of the most successful global indie production companies.
"We started in 1998 with a commitment of $250 million for budgets that went from $15 million to $55 million," said Berman. "Now, we can spend whatever it takes to make the kinds of movies we feel are appropriate for our program. We no longer have the cut-off that kept us out of projects we wanted to do. One was 'Perfect Storm,' which Alan Horn brought to us but we were unable to accommodate because of its budget. The change is emblematic in that we are moving forward on 'Troy' with the same director and a comparable budget that is north of $100 million. It will be one of our tent poles for 2004. From the moment we came on board with Jeff Robinov and Wolfgang, we have had a seat at the creative table. We are not a bank, we borrow money from a bank so that we can be an active producer and co-marketer of our films. That includes mutual approval of things like cast and director."
The VRP formula works as follows: when WB offers a film for co-financing, the project is evaluated by a green light committee that includes VRL's Burke, Kirby, and Berman. WB controls all territories but Australia, New Zealand, Greece and Singapore, where VRL distributes.
As other cofinancing and producing entities have downsized or fallen by the wayside, VRP has flourished. Making smart bets was key, as was having a deep-pocketed parent to provide a cushion when bets on films like "Red Planet," "The Majestic" and "Pluto Nash" didn't pay off. The move by VRP to become a proactive producing as well as financing partner in WB-generated product also helped.
Burke stresses VRL is building a valuable portfolio of films where the risks are minimized not only by the spread of films but also WB's numerous output deals throughout the world.
"Unlike some companies with rent-a-studio deals, we co-finance 50/50, WB distributes throughout the world in all media except those territories where VRL has its distribution arm, and it's close to a split pot deal," said Berman. "We share in all revenue and we pay a reduced distribution fee. There is more than enough incentive for WB to fight hard for our product, because half of the money in each film is theirs. And because we only do six to eight films a year, we are able to completely focus the attention on production and marketing that each films deserves."
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