HBO Films London is shutting down as part of a rationalizing move that will see overseas sales of HBO's films now handled out of the US.

Theclosure follows the creation of Picturehouse, the New York-based joint venture US theatrical distribution company that unites HBO Films with New Line.

That recent tie-up leaves opens up the possibility that New Line International may end up handling sales of films from both entities from Los Angeles. Alternatively, Picturehouse creates its own dedicated sales operation that would look after HBO titles and any other projects on which Picturehouse acquires worldwide rights.

"With greater focus from HBO Films onproducing theatrical films, we feel our new international theatricaldistribution activities will be most effectively handled if headquartered outof Los Angeles and New York rather than London," HBO said in a statement today.

"It has been a painful move."

HBO Films London managing director PennyWolf said she was disappointed but understood the decision.

"This isn't about closing down HBO filmsbut about relocating the sales operation in LA."

Wolf's team has completed the key dealson its current crop of completed films, including Gus Van Sant's Last Days.

Those in production, including MaryHarron's The Notorious Bettie Page will be handled from LA.

"Of course, there will be loose ends butby the time the films are ready the LA operation will have all its ducks in row," says Wolf.

HBO Film's London has enjoyed majorsuccesses at the key festivals, where it forged close links with organisers.

Gus Van Sant's Elephant picked up thePalme d'Or and best director prize at Cannes 2003, AmericanSplendor won the Grand Jury Prize at Sundance and Maria Full Of Grace wasOscar-nominated after sweeping all the main awards at the Deauville festival in France.

The location in London was a factor inthe award success, says Wolf.

It was a huge advantage to be in Europeand close to the festivals. But that has to be weighed up against theadvantages of having all the business in LA."

Wolf says she will take the summer offand consider her options in the autumn. Four other people will be affected.

"It's been a fantastic two and a halfyears," she said.