Wednesday, January 10, 2007

hedge funds "schadenfreude"/ hollywood

hedge funds seem to be really desperate. one more signal that money is way to "easy". the whole thing reminds me of the crazy days in the german "neue markt" back 1999/2000 where german investors put billions in ipo´s with companies like intertainment or kinowelt (charts). they promised to produce blockbuster in hollywood. lots of films were made and also a few blockbusters. but the germans were so inexperienced that all the profits were withheld from them and went somewhere in the us. in the end all german companies went bankrupt.

hedge fonds überall. zeigt wohl ganz klar wie verzweifelt die sache nach rendite ist. kohle scheint immer noch im überfluss vorhanden zu sein. ändert sich aber wohl gearde langsam (aber sicher). bei mir kommen da unweigerlich erinnerungen an den neuen markt zum vorschein.

Jan. 9 (Bloomberg) -- When news broke that Benjamin Waisbren had been fired as Hollywood frontman for Stark Investments, moviedom shuddered.

Hedge fund managers such as St. Francis, Wisconsin-based Stark have become piggy banks for the U.S. film industry. Since 2005, these funds and private equity investors have committed $4.5 billion to movies, betting the box office can beat the markets.

.... Waisbren, 49, had convinced his bosses at Stark that Hollywood could be structured like any other investment, albeit with more glitz.

Stark, which manages $9.4 billion, ended up getting soaked by ``Poseidon,'' the 2006 remake of ``The Poseidon Adventure,'' which sank at the box office. .....

Waisbren isn't the first out-of-towner to be chewed up by Hollywood -- and he won't be the last. These days, outside investors cover as much as a third of Hollywood production expenses. That bill amounts to as much as $2.5 billion annually ....

Waisbren learned the harsh lesson that success in Hollywood is as much about luck as financial analysis. .....
Movie Money
Other than watching movies, Waisbren didn't give much thought to Hollywood until he learned from Merrill Lynch about Melrose Investors LLC, a fund the firm had put together that had raised $225 million from private investors to invest in 25 movies produced by Viacom Inc.'s Paramount Motion Picture Group. Paramount announced in October that it had joined with Dresdner Kleinwort Group Ltd. to create a second, $300 million fund to finance at least 30 films. .......

In internal presentations at Stark and in Hollywood, Waisbren promoted his ``basic enterprise model'' that would make money for Stark and other investors, according to excerpts of one presentation. Boiled down to its basics, his plan was to originate movies, sell them in foreign markets and end up with a film archive that could be exploited in distribution.

`Secret Sauce'
Waisbren distinguished the strategy with what he calls a ``secret sauce'' that could produce ``mid- to high-teen returns (or better),'' according to his presentation. Still reluctant to discuss specifics, he says the sauce involved ``dramatically'' reducing borrowing costs using arbitrage.

His biggest and most visible deal was a $264 million co- financing agreement with Time Warner Inc.'s Warner Bros. Entertainment to produce six films, including ``V for Vendetta'' and the star-crossed ``Poseidon.'' Both films received lukewarm reviews when released in early 2006, and both stumbled at the box office. ``V for Vendetta'' brought in $71 million in the U.S., and ``Poseidon'' earned $61 million domestically and $121 million in foreign sales. Recent releases include ``Blood Diamond'' and ``The Good German,'' which stars George Clooney.
Along the way, Waisbren teamed up with Kavanaugh, who brokered the Warner Bros

As he explains it, he saw a vacuum develop as studios began hogging cash from their conglomerate parents, who prefer off-balance-sheet deals when possible to reduce debt. At the same time, Wall Street was awash in money from firms such as Stark. ....
``No one mirrored what hedge funds participated in in the past in oil or the derivatives business,'' he says. ``Our business found a way to use the data to create those structures.'' ...

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