The global film business is being revolutionised as billions of dollars of bank finance pours into the sector. Laura Fazio, formerly managing director and North American group head for corporate finance and origination's media industry practice, Dresdner Kleinwort, gives Richard Brass her assessment of the situation
One name close to the explosion in film financing is that of investment banking giant Dresdner Kleinwort - and in particular, Laura Fazio, who until last week was the bank's media expert (at press time it was announced Fazio was joining Deutsche Bank as managing director and global head of media and entertainment finance within the bank's securitised products group of its global markets division).
While many institutions have dived into film recently, Dresdner's activity in the industry, and Fazio's involvement in some of the biggest deals in the game, goes back many years.
Before joining Dresdner in 1998, Fazio was part of big deals involving New Line, New Millennium, Galaxy and Sony while working for ABN-Amro, and her recent deals are even more impressive.
In June, Dresdner closed the Legendary Pictures deal, and other recent financings include Spyglass Entertainment's $275m, Twentieth Century Fox's $597m recapitalisation of Dune Entertainment and last year's $750m deal for DreamWorks. And there is more to come.
'We've always been very much involved in the film side,' says Fazio, speaking for Dresdner Kleinwort before the announcement of her move to Deutsche Bank. 'I've been doing the film-financing business for 15-plus years. But you've gone from a deal here and a deal there to the pace increasing dramatically.'
The film industry's constant hunger for finance is one of its most outstanding features for bankers, she says. 'I finance the cable business as well, and when a cable network is built, it's built, and there's not much more for you to do. With film there's an evergreen financing requirement.
'Right now there's a perfect storm in film. You've got scrutiny from the parent companies, you've got an ability and a level of comfort in providing the investors with data, and you've got the rise of the hedge funds and private equity, who are hungry for off-the-run assets and willing to look at this esoteric asset class.
'You put all of these things together and you have demand, you have appetite from the investors and you have appetite from the issuer. That's what's caused more than $11bn in financings in the last 20 months.'
The essence of slate financing's appeal, Fazio says, is that it mitigates the risk traditionally associated with this industry, with its not-undeserved reputation for chance and heavy losses.
'Our data and our Monte Carlo[a risk assessment tool in which possible scenarios are played out] give us a great deal of comfort and give our investors comfort that, with at least a 15-picture film slate - and my committees are more comfortable with a 25-picture film slate - and with a major studio distributor and the relative value analysis, both quantitative and qualitative, we see an opportunity to manage the risk and provide acceptable returns to our investor base.'
She is also in no doubt that slate financing is imposing a new financial regime on film-makers that will create long-term benefits for the industry. 'I think this kind of financing is making the film industry much more fiscally prudent.
I've had studio heads tell me, 'I like having hedge-fund guys in with me, because I'm not always the bad guy when it comes to sitting down with the talent or sitting down with my marketing people. I can say, hey, I'm being dictated to by my equity partners.''
But can financing really keep going at this pace' No doubt about it, says Fazio. She believes another $15bn in the next year is achievable. 'I think that would be a valid number. What happens is each of these libraries gets larger, there are opportunities not just from the large majors but from independent and satellite studios, and then there's the opportunity globally.'
Dresdner is already doing its bit to reach that figure. The bank is putting the finishing touches to a series of deals, with figures for two of them, Fazio says, of around $750m and $500m.