EXCLUSIVE, updated with statement from Sony: Several companies are circling to either buy out Lone Star’s profit participation in Sony films for like 70 cents on the dollar or step in to buy “the library,” as its being referred to, and also fund Sony films. The LStar film financing deal is all but dead as the deadline expiration comes at midnight tonight.
While we hear that FTI and Salem are working on valuations, Content Partners, Vine, Shamrock and Qualia (Amir Malin’s company) are looking to buy out the profit participations (in a fire sale) from Lone Star, while Beverly Hills-based DMG we hear is attempting to come in as a “white knight” of sorts to not only buy out the participation but also step in as a funder.
“Lone Star has been a great partner for several years and as anticipated, the deal has concluded – and on a high note,” said a Sony spokesperson. “The decision to part ways was mutual, and won’t impact the studio’s plans or our strong slate of upcoming films moving forward.”
Under terms of the deal between LStar and Sony, LStar got a fee for each movie. Any deal between any of these potential suitors will get complicated, according with those with knowledge of the current situation. Lone Star is a hedge fund so they clearly are in this for the money, so selling off its profit participation immediately makes sense. There are about 30 titles in the library and the majority of them (some say 28) were losers, so this is a highly distressed asset at this point.
However, LStar is not obligated to sell its participations in future revenues from the films, but it does have the right to when the deal ends — and everyone involved expects that to happen.
All the senior lenders around town are currently looking at this situation and the potential “library,” a la profit participation revenues for sale, coming into the market.
The relationship between Sony and Lone Star has disintegrated in recent months, during which time Lone Star Capital and the studio had been re-evaluating their deal. The financier had agreed to co-finance a full slate of films in 2014 (with CitiBank) but had pulled out of its $40 million commitment with Ghostbusters previously; they started re-negotiating deal terms afterwards.
At the moment, LStar will default on The Emoji Movie and Flatliners (which Sony is partnered on with Crosscreek), which would allow them to get out of the deal in an abrupt manner. Sony had thought they would invest the 25% in Peter Rabbit, The Star (Sony partnered with Walden), and Hotel Transylvania.
It would make sense for DMG,which has a $300 million investment in Valiant Entertainment as it and the comic book company are partners along with Fast & Furious franchise producer Neal H Moritz and Sony Pictures to produce five films based on superhero franchises Bloodshot and Harbinger. Plans are for two features for each of the properties along with a shared universe crossover pic, Harbinger Wars.
Sony and DMG have history in the superhero world, recently with The Amazing Spider-Man films and Iron Man 3, respectively. It’s not known what kind of deal LStar could make, but it could be possible it would get a higher price for the titles, and then Sony might have a new funder.
The studio’s upcoming slate includes The Dark Tower, Granite Mountain Hotshots and its Christmas offering Jumanji: Welcome To The Jungle and some interesting projects coming in with Venom, Spider-Man: Homecoming 2 and the animated Spider-Man movie.
No one involved would comment and some would not return calls seeking comment.