Germany's Advanced Medien has failed to meet investment plans for Wolfgang Petersen's Red Cliff Productions and has been forced to end a $15.1m package deal with StudioCanal.

The ailing rights trader has revealed that it had provided Petersen's US-based production outfit a certified letter of credit worth $3m instead of the originally planned $5m due to Advanced's cash flow problems. Advanced owns a 51% stake in Red Cliff. A multi-title deal with StudioCanal was terminated in February because of payment delays.

Advanced revealed the moves as it announced year-on-year earnings had fallen from $508,000 (Euros0.6m) to a loss of $2.6m (Euros3.1m) for the first quarter this year. The company said the loss was due to weak sales and a negative result in film distribution. Sales of $593,000 (Euros0.7m) were 90% down on the same period for last year ($5.3m/Euros6.3m).

According to its quarterly report, Advanced's executive board is mulling a "variety of options" to relieve the company's financial situation. The company said it is raising additional equity by issuing a bond with warrants, while "planning further debt relief measures". Advanced is "looking for suitable corporate partners" and aims to make decisions in this respect during the third quarter.

The executive board is now "continuing its settlement negotiations with StudioCanal and is confident about reaching an agreement". Advanced was boosted by the performance of the US hit Heartbreakers, which represented the "most expensive and valuable licensing rights in the company's history to date". The film has been seen by over 600,000 cinemagoers in Germany in its first four weeks of release, with revenues generated from pay TV, free TV and video/DVD licensing to be booked in the second quarter.

A return from Advanced's 20% profit share in Heartbreakers' worldwide distribution outside the US is expected during the second half of 2001.

The board noted that the first three months of 2001 had been "characterised by liquidity pressures and the initiation of measures to streamline our business segments". Strong revenues are expected in the second quarter from Advanced's other US subsidiary, Unified Film Organisation, as post-production disruptions, in particular, triggered delivery delays.