Tom Cruise/UA Secures Its $500 Million In Funds

In the wake of yesterday's news that Goldman Sachs had backed away from a $1 billion fund commitment for MGM, United Artists (which is co-owned by MGM, Tom Cruise, and his producing partner Paula Wagner) closed its long-awaited $500 million deal with Merrill Lynch, Variety reports.

Most of the major negotiations were finalized before the market went south earlier this month.

Wagner said UA was especially pleased to be able to close the deal amid challenging conditions in the financial markets.

"This has been in the works for a long time really," Wagner said. "It's yet another vote of confidence in the potential success of United Artists."

UA's financing, effective immediately, will provide coin for 15-18 films over the next five years, including two projects in the works: "Lions for Lambs," a Robert Redford-directed pic starring Redford, Cruise and Meryl Streep that is skedded to bow Nov. 9, and "Valkyrie," a Bryan Singer-helmed WWII thriller also starring Cruise that is lensing in Germany.

One busy financial dealmaker said the fact the deal didn't come apart was good news for the entertainment industry and future fundraising efforts.

"There's no death knell for investment in the entertainment industry," he said.

The WSJ, however, is painting a different picture:

Wall Street's flirtation with Hollywood is showing signs of strain as the credit squeeze dents already waning enthusiasm for so-called slate-financing deals. Several funds set up to provide financing for movie studios are facing uncertainty, both in terms of underwriting existing deals and closing new ones.

Flush with cash, Wall Street's top-flight banks poured billions of dollars into financing groups, or slates, of movies in the past couple of years. But few are on track to make healthy returns, mostly because the studios only included their riskiest movies. Now, as the banks face a squeeze in the credit markets, Hollywood financing may prove to be a disposable form of high-risk funding.

Hollywood has come to rely heavily on such funding. If that money dries up, the studios could find themselves with a significant hole they need to fill elsewhere.

Metro-Goldwyn-Mayer Inc., which is owned by a consortium including Sony Corp., this week stalled in negotiations on a slate-financing deal with Goldman Sachs Group Inc. and Deutsche Bank AG, according to people familiar with the situation.

Some already announced deals, meanwhile, have been grappling with challenges in the syndication markets. When banks started doing these deals a few years ago, they would usually agree to a "best efforts" deal with the studios, meaning they would only commit to a deal if they could underwrite it to reduce their risk.

But more recently, banks have committed to deals before underwriting them. Now, with several banks struggling to syndicate new deals at acceptable prices, some are reverting back to "best efforts" deals.