Relativity pacts big with Universal

Capitol group to finance 75% of studio's slate

By DIANE GARRETT

Kavanaugh

Universal has made Ryan Kavanaugh its go-to moneyman.

Under new four-year deal, financier's Relativity Capital subsidiary will funnel billions into studio's slate, providing a steady stream of coin to offset costs. Relativity will co-finance 75% of the studio's slate through 2011 under the arrangement

This is Relativity's third co-financing deal with Universal and far more comprehensive than its previous two. Relativity's Gun Hill I fund co-financed 17 Sony and Universal films, ending with "The Kingdom," although it was originally intended to cover 18 pics. It was followed by Gun Hill II, also intended to co-finance 18 pics from the same two studios.

This deal is expected to cover 45 pics; each side can nix a certain number of projects from the arrangement. Universal, for example, might opt to retain full control over "The Mummy 3," although that decision has not been finalized. Unlike the previous two funds this one is not built around pre-selected pics.

"It's more or less the entire slate," Kavanaugh said.

U vice chair Rick Finkelstein said the deal's comprehensive nature was a big part of its appeal. "It's much simpler to have this in place," he said. "Now we can focus on the product and less on having to arrange co-financing."

Chief difference in this pact is that Relativity will provide coin from its Relativity Capital subsidiary rather than rely on third-party investors.

"The key focus for us is it's our own money," Kavanaugh said. "We're responsible: It's ours to win, ours to lose."

Deal, unveiled days after Kavanaugh prevailed in the latest round of his legal battle with Michael Sitrick over earlier business dealings, provides U with a steady stream of capital for the bulk of its slate.

"This co-financing model works for us on a number of levels," Finkelstein said. "It helps smooth earnings and it provides us with a lot of cash. Thirdly, it shares risk."

Revolving nature means that Relativity Capital might have $400 million to $500 million invested in U pics at a time. Subsidiary was formed in January with Gotham hedge fund Elliott Assoc., an investor in earlier funds.

Although some have criticized Kavanaugh's earlier slate deals for their return, Universal has not been among them. In October, after "The Kingdom" bowed, U chair Marc Shmuger told Daily Variety the studio would do it again.

"We didn't bat a thousand," he said, "but we did pretty damn well."