Writing about big film financing deals is not for every Tom, Dick, or Harriet. It usually involves intricate knowledge of behind-the-scenes discussions atop the major studios and film funds. So I suppose it was inevitable that today Variety would get it wrong by leaving such sophisticated reporting in the hands of a shallowly sourced young newcomer who mistakenly writes that “Paramount has found new investors to back its tentpoles” when actually it’s just a minor update affecting non-Paramount partners of a 5-year-old co-financing deal. “The story is stupid, misguided, and misleading,” a top Paramount executive just told me. “Nothing has changed in our financing approach to motion pictures. There is no new financing deal. Variety has it totally wrong.”

So let me tell you what’s really going on: only that the existing investors in Melrose II continue to have the right to co-finance sequels to the specific movies originally co-funded by them starting back in 2006. (Melrose I from 2004 was a $225 million fund bankrolling 25 Paramount films.) “They have no rights to finance any go-forward Paramount pics other than those sequels. And they can’t finance any sequels that Paramount doesn’t want to make,” the top Paramount exec tells me. “This has almost no impact on Paramount. It’s merely a new financing restructuring on their end.” What happened is only that JP Morgan and Bank of America replaced Germany’s Commerzbank on June 15th as senior lenders on Melrose II. Originally, Dresdner bank had been involved, but then Commerzbank purchased Dresdner in 2009 and inherited the deal. Commerzbank has been shrinking its media lending in recent months so other partners were needed to take over.

Melrose II has the right to co-finance sequels to: She’s The Man, World Trade Center, Barnyard, Nacho Libre, Mission: Impossible 3, Failure To Launch, The Last Kiss, Jackass 2, Flags of Our Fathers, Charlotte’s Web, Dreamgirls, Freedom Writers, Norbit, Reno 911! Miami, Zodiac, Shooter, Blades of Glory, Disturbia, Transformers 1 & 2, Hot Rod, Stardust, The Heartbreak Kid, Things We Lost in the Fire, Beowulf, Sweeney Todd, Cloverfield, and Spiderwick Chronicles.

Let’s be blunt: most of those movies were dogs. So “there are no sequels anticipated for any of these films besides Transformers 3 and Mission: Impossible 4,” a Paramount exec tells me. Right now the Melrose II partners have 15% into Transformers 3 but skipped financing Jackass 3D. (Dumb move, because that threequel was almost pure profit.) The Melrose II partners are still considering co-financing a portion of Mission: Impossible 4 – Ghost Protocol, and have until shortly before the film’s December 16th release to decide. But their share in that would come out of David Ellison’s Skydance co-financing, and if Melrose II elects to participate, then Ellison will have to reduce his co-financing share.

Why are these important distinctions? Because the way that Hollywood studios finance their pictures is very important to the overall health of the industry. Worse, it gives the wrong impression that Paramount is suddenly flush with new outside financing. Contrary to Variety‘s claim that the Melrose II restructuring is “a further sign that big commercial banks are once again warming up to Hollywood,” it shows the continuing nervousness by European institutions once so aggressive funding Hollywood films.

I remember very clearly the moment 3 years ago (almost to the day) that Hollywood studios received a nasty shock when the worldwide credit crunch began arriving on their doorsteps unannounced. The warning bell was sounded by an unfolding story about venerable Paramount’s financing crisis. Some media incorrectly reported that Deutsche Bank had just pulled out of a $450 million financing deal to mitigate the studio’s risk on 30 films. Paramount’s chief Brad Grey quickly put out the spin that the studio was the one who walked away.

What actually happened was that Paramount had been negotiating with Deutsche Bank for an overall deal that financed 25% of each movie, capped at $50 million. Also contributing would be Qualia Capital, the bicoastal media and entertainment investment fund. That’s how the newly named “Melrose Pandora” deal reached $450 million. But by late spring, the credit marketplace had changed dramatically. Deutsche Bank found a bunch of outside dough and then committed itself to $150 mil. But when it went out to other banks to syndicate an additional $150 mil, trouble ensued.

At this point, the potential financial partners came back to Paramount with changed terms: Instead of a 25% investment, it was only going to be 20%, and accompanying that were worsened terms. Paramount’s Grey et al said forget it. And then, shortly afterward, Deutsche Bank closed its film-financing arm like so many other major financial institutions and funds did during the global crisis.

The result is that, all this time, Paramount has not had a co-financing deal. It’s not crucial for survival, but it does let moguls sleep sounder at night. That’s why Fox has joined with Dune, Warner Bros with Legendary, Disney with Kingdom, both Sony and Universal with Relativity, the old UA with Merrill Lynch. Almost all these deals are still in place. And, under normal circumstances, Paramount would have been able to replace Deutsche Bank fairly easily. But instead Paramount suspended even looking for an overall financial partner until the credit crunch was over. Which placed its parent company Viacom almost solely on the hook for financing new slates of pictures, which is like a tightrope walker working without a net. Remember what happened to the Wallendas?

The alternative at Paramount was for filmmakers to BYOF (Bring Your Own Financing) so, without an overall co-financing deal, Paramount arranged for individual partners to help fund its slate of films on a one-by-one basis: Level 1 helped underwrite Star Trek, Spyglass aided G.I. JoeThe Curious Case Of Benjamin Button was a coproduction with Warner Bros, and Transformers had Melrose II.