When there's no more extra credit

By Steven Zeitchik

How loudly will the credit crunch reverberate back to the film business? Pretty loud, we think, and in ways that many of us can't imagine yet. But then again, the closest we got to an MBA was Tivo-ing the Nightly Business Report two years ago.

Execs at the upper echelons of Goldman Sachs, on the other hand, know of what they speak. Which is why the sobering words of several of the bank's managing directors at a roundtable event we attended Thursday about the credit markets landed so resoundingly.

Speaking of corporations' general ability to get money, Matt DeFusco noted that we faced a much longer-term problem that some might realize. And "when the markets do reopen, it will be a very high quality bond" that banks are looking for/demanding. "It will be a different world from the one that was around just before this summer."

Of course most studios say they don't worry about that because the money they've already locked up now is ironclad. Or is it?

There's reason to think the credit facilities that are financing studio or producer slates now may not last the current shakeout. Said GS's Dennis Coleman. "What we can expect is that banks take a look at their total exposure," he said. "In some cases theyre going to shrink their exposure and in the case of more distressed institutions they're going to drop."

Studio execs have said they think that no matter what happens to any bank, any shortfall will be made up. But experts aren't so sure. "If you have a $100 million facility covered by five banks and one of the banks is going under, the company is out $20 million," Coleman said. "It's not the other banks' responsibility to lend another $20 million."

Comments

[Jaime G]

Why not Tivo Nightly Business Report more often?

[Yuri Rutman]

The interesting thing is that not only do the studios have enough money NOT to worry about debt, they can keep rolling it over and hedging using Section 181 benefits

So when they cry foul that hedge funds or commercial debt is hard to come by, they should start parking their own money where their mouth is-and believing in their own product--

[Roshni]

The Studios and the expert businessmen always try to covered by bank given facility for rolling their money for the business.And whey should not? these increases the price of money also the creditsthey debit the money back to the bank by making them double then this is the best way to circulate the money chainfor financial benifits.

[James Harning]

Film Financing is always available, it just depends upon having the right paperwork and contacting the right people, specially for the independent film makers. I seen many indies reaching out to the right sources by using some tools found on the internet like the one found at Capital Equity Partners website and that has many independent film makers listed that are financing their films by means of these contacts so in my opinion its really about who you know and readiness! PERIOD.