Los Angeles: Pressure on investment banks may create problems for some studios and filmmakers trying to raise money, Lions Gate Entertainment Corp. Vice Chairman Michael Burns said.
Companies will have a harder time persuading lenders to accept the risks involved in movie-making, Burns said in a telephone interview. Borrowers will find it tougher to use their equity to leverage loans, he said.
Tough environment
"It's certainly going to be harder for marginal deals," Burns said.
"Good deals get done but in a tough credit environment marginal deals get crushed."
The climate may create opportunities for companies with cash, Burns said.
Lions Gate, maker of the Saw and Tyler Perry films, will finish the fiscal year ending March 31 with $300 million to $400 million in cash and no bank debt.
The company may look to add to its film library or buy websites that can be used to promote movies, if properties can be found at the right price, he said.
Terrific shape
"We're in terrific shape from a balance sheet perspective," he said. "It's a good time to be unleveraged."
Lions Gate may post a record fourth-quarter profit of 30 cents a share on sales of $379.4 million, the average estimates of analysts surveyed by Bloomberg.
Revenue was helped by sales of home videos, including 3:10 to Yuma and Perry's Why Did I Get Married.
Last month, Lions Gate reported third-quarter profit fell 90 per cent as it invested in its television business. Sales rose 14 per cent to $290.9 million in the period ended December 31.
Lenders are tightening credit amid turmoil caused by the subprime mortgage crisis.
Goldman Sachs Group Inc., the biggest US securities firm, and Lehman Brothers Holdings Inc. had their credit-rating outlooks cut to negative last week by Standard & Poor's, which said profit at Wall Street banks may fall as much as 30 per cent in the coming year.
JPMorgan Chase & Co., the third-largest US bank by assets, agreed to buy Bear Stearns Cos. in a $366 million all-stock deal.
So far, Hollywood has weathered the crisis. Box-office sales this year total $1.82 billion, up 2.6 per cent from a year earlier, according to box-office tracker Media By Numbers. Attendance has dropped less than 1 per cent.
