EXCLUSIVE: I began hearing rumors from sources yesterday that The Film Department had laid off its entire staff. Today, I can confirm that it’s a very sad day for that 3-year-old company that financed and produced the hit film Law-Abiding Citizen: it will close as of May 27th. Here’s what happened in summary to Chairman/CEO Mark Gill and Vice Chairman/COO Neil Sacker: Though the company was profitable in 2010 and generated $90 Million in revenues in the last 18 months, The Film Department was not allowed to keep it due to lender stipulations forced upon the company during the credit crisis. So all that money went to lenders. When the company had become profitable and improved its balance sheet by more than $105 million in the last year, it sought to raise $200 million in new private equity and debt to become a U.S. film distributor as well as a financier/producer. But it was unable to close its recapitalization in challenging capital markets.
“What if you made $90 million and your banks wouldn’t let you keep it? Basically, that’s what happened to us,” Mark Gill, Chairman and CEO of The Film Department, said in an exclusive statement to me. “We managed to hold on in this impossible position for 15 months, but we couldn’t survive indefinitely.”
“We came within inches of closing our recapitalization on three occasions, but unfortunately close isn’t good enough,” Neil Sacker, Vice Chairman and COO of the company, said in an exclusive statement to me. “We’re grateful to everyone—filmmakers, talent, financiers, industry experts and our staff—who contributed considerable time, effort, expertise and capital to the company.”
Both Gill and Sacker have some exciting opportunities being offered to them now. But the recent past has been painful for them. Over the past 18 months, The Film department paid off $40 million in senior debt to its commercial banks under customary terms. But in September of 2009, in the aftermath of the credit crisis, the company was forced to accelerate repayment of its second-lien notes, which ultimately resulted in $50 million in early payments to a lender. That $50 million would otherwise have been available to the company to fund continuing operations. When leveraged with traditional senior debt financing, those funds would have allowed the company to generate another $100 million in production commitments. Previously, the company had paid off its $140 million senior production loan facility in full.
The Film Department is best known for financing and producing Law-Abiding Citizen, a $40 million thriller starring Gerard Butler and Jamie Foxx that has earned $133 million at the worldwide box office. The company also financed and produced two films not yet released: the romantic comedy The Rebound, starring Catherine Zeta-Jones and Justin Bartha, and A Little Bit of Heaven, a love story starring Kate Hudson, Gael Garcia Bernal, Whoopi Goldberg and Kathy Bates. Plans for those two films to be released in the U.S. by third parties are in discussion now.