Entertainment ABS Grows to Blockbuster Heights?


What at first looked like a limited engagement with the asset-backed market appears to have turned into a full-length run, as a slew of motion picture funding, event financing and intellectual property securitization deals are queued up to set the financial markets abuzz into the New Year.

The new deals are likely to come from independent film studios, single sporting event productions, and casino-building projects, said ABS professionals last week at Information Management Network's securitization conference in Bermuda.

On The Subject of Size

A pooled securitization of $1 billion in movie receivables generated by several indie film studios was one rumor floating in the Bermuda breeze. Such a deal, if it were to come to fruition, would largely silence those who have long complained that the diminutive size of the market and the small nature of its individual deals block the sector's growth.

"It's not my baby," said a source familiar with the deal, "but they are looking at getting a large volume, credit-enhanced, asset-backed financing of a billion dollars for a number of independent studios."

Other sizeable deals include a future film receivables transaction in the ratings cue at Moody's Investors Service for $500 million, and a $220 million independent studios transaction currently being structured by J&H Marsh & McLennan. These deals are collateralized by a myriad of film revenue streams, including video sales and distribution fees.

Steve Stabler, chief executive officer at Destination Film Distribution Co., an indie film company that produced "Kingpin," "Dumb and Dumber," and "Beverly Hills Ninja," was in attendance at the conference, and most expect his company to finance itself regularly through securitization going forward. The company recently completed a deal led by Donaldson, Lufkin & Jenrette and insured by New Hampshire Insurance Co. that totaled $100 million.

J&H And Pru, High-Kicking In The Queue

J&H Marsh & McLennan has also prepared a $25 million "warm-up deal" for an unnamed independent film studio that J&H vice president Scott Brady said is the "farthest along" of the J&H deals.

The company is also working on a $25 million, single sporting event deal similar to the millenium concert transaction that has circled recently. In addition, J&H has a $35 million casino construction deal in the works.

Prudential Securities Inc. is just as busy, according to a source close to the company. It expects to close a $35 million deal based on the royalty revenue from a "famous Latin American singer," whose songs Ricky Martin is known for performing. The source would not confirm whom it was, but the deal is set to close later this month.

Pru will also hit the streets with a $75 million intellectual property transaction pooling the royalties of an eclectic bunch of entertainers including Christian, alternative, Motown and Latin artists, said the source.

Growing Pains

Though the sector appears to be ramping up, problems involving the esoteric nature of the deals are clouding the blue skies a bit.

While most of these deals still need insurance to get sold, there is no guarantee they will price with a wrap. Recently, a minimum credit quality requirement for the insurer seems to have developed among buysiders, and because most insurers on entertainment structures are single-A, they fail to make the cut.

Prudential Structured Finance Group currently has a casino deal in the market that is "not going to well," due to the single-A rating of the company that is insuring it, said a source close to the situation.

"It's an insured deal," the source said. "It should have gotten done right away, but the fact is, people just don't care about single-A right now."

Prudential Structured Finance is also readying an entertainment deal of multiple assets from music, film and cartoons, sources said.