Weinstein Co.’s Current Work: A Financial Drama

Independent movie studios normally strike it big when they release surprise megahits.  For Weinstein Co., although the unexpected success of Inglourious Basterds has helped their cash flow problems, the company is still somewhat financially inglorious.

Harvey and Bob Weinstein rewrote Hollywood success in the 90’s when their Miramax Films released the blockbuster Pulp Fiction.  Taking low-budget pictures to mainstream hits turned the Weinsteins into behind the scenes megastars.  In 1993 they sold Miramax to Walt Disney Co., and then in 2005 left Miramax for good to start their next venture.  Investors, at the time, were eager to grab the Weinsteins coattails.
The two founded Weinstein Co. four years ago and the independent producers have since spent the majority of the company’s funds.  In 2005, $1.2 billion in debt and equity financing was raised for its launch and now with a minimal amount of reserve, the pair faces a unique challenge.  Either quickly find $50 million… or figure out a way for the upcoming film projects to build upon the unpredicted success of Inglourious Basterds.

In a statement, one of the Weinsteins said, “The company has the resources to meet all of our obligations, from production to release of our films.  As far as new financing opportunities, we will always be interested in new deals, provided we see mutual profitability.”  However, the growing pressure and expectations on the small company is sure to make financials a topic of interest.

Located in Hollywood, Weinstein Co.’s money worries aren’t uncharacteristic—many independent production companies are facing the same problems.  With financing being harder to come by for independent films and a shift in the audiences’ taste, the storyline for the Weinstein’s sounds more like a melodrama than a feel good movie.
Earlier this year, in Act I, Scene I of the Weinstein Co. financial drama, a $75 million bridge loan from Ziff Brothers Investments was not paid back.  Dirk Ziff, the investment firm’s chairman was one of the Weinstein’s early backers and a friend of Harvey’s.  However, with interest accruing on the unpaid loan, adding to the production company’s debt, Ziff stepped down from the Weinstein Co. board.  That doesn’t make Ziff the villain in this plot though as sources say he continues to work with and support the company.

The next scene of the Weinstein financial drama called for a supporting character.  The company hired New-York based investment bank Miller Buckfire to investigate restructuring about $600 million in debt financing raised by Goldman Sachs Group.   By July, Miller Buckfire’s job was done as the bank had restructured $500 million in securitized debt.   The “status- quo” restructuring will begin to mature in 2014, and currently gives Weinstein Co. access to cash that had been earmarked for loan repayment.

The plot thickens with the success of Inglourious Basterds — which $35 million of the available money was used to market.  The Quentin Tarantino directed World War II fantasy has taken in more than $100 million in the US box office alone, making it the biggest success in Weinstein. Co history.  But no award-winning script makes it this easy for the lead to prevail, and Weinsteins know that.  A year before Inglourious Basterds was released, the company entered into a profit-sharing deal with Universal Pictures.  This allowed it to split all the costs, but also all the income.

As the protagonists prepare for Act II, they have begun cutting costs.  Selling foreign distribution rights for future movies, exploring joint ventures, and cutting the staff to about 90 employees, are all actions that are being taken to access more liquidity.  The upcoming slate includes Nine, based on the Broadway musical, The Road, a version of Cormac McCarthy’s apocalyptic novel, as well as Hoodwinked 2, and Youth in Revolt.

More spoilers on the Weinstein Co. drama