Tough Times for MGM and Goldman Sachs?

Is the money that's been pouring into Hollywood turning into a trickle? According to the Financial Times, the credit crunch that's shaking world markets is now beginning to rock the entertainment industry after Goldman Sachs, which was trying to raise between $700 million-$1 billion for MGM, withdrew it's commitment to underwrite the deal.

The financing would have provided funds for films including The Hobbit, an MGM co-production with New Line Entertainment, and the fourth instalment in the Terminator franchise. It is also likely that funds would have gone towards the next James Bond film, an MGM co-production with Sony.

Both Goldman and MGM declined comment, but financing reportedly has not been abandoned. According to the FT, the bank is "believed to have moved from an underwriting commitment to a 'best efforts' commitment to complete the financing." But its underwriting withdrawal in these current conditions means that it will all take more time. The FT writes that MGM is understood to be relaxed about the delay "because none of the films in line to receive funds from the financing is due to start production imminently." However, with a possible strike looming next summer, I find it hard to believe that anyone can feel calm about any scenario that could push back production. The Hollywood Reporter spoke to a source familiar with the situation who said "such deals would under normal market conditions take about 15-18 months to conclude."

But amid the credit crunch, MGM may wait for the market to possibly bounce back later this year before pushing hard for the financing -- particularly, since the individual film projects also involve various development issues that must be resolved before any of the projects are expected to go into production.

The two banks could also very well remain in business with MGM and syndicate a loan by bringing in other partners, the person added.

The credit crunch, meanwhile, has had no effect on an estimated $500 million financing deal that MGM's United Artists label has pursued with Merrill Lynch, according to sources.

Texas Pacific Group, Providence Equity Partners, Sony and Comcast bought MGM and its 4,000-title library from Kirk Kerkorian in 2004 for $4.8 billion.

Goldman drops $1bn MGM financing [Financial Times]
MGM titles face financial test [The Hollywood Reporter]