Walt Disney Co., whose film unit said it would lose money in the fourth quarter, recently raised $505 million from investors to reduce the risk of financing movies, the first time it has done so in almost a decade.
Kingdom Films, set up in June by Credit Suisse First Boston to raise the financing, will provide 40% of production and distribution costs for about 32 films over the next four years, Burbank-based Disney said. It will receive 40% of the profit, including from box-office and video sales.
The deal guarantees Disney distribution fees and 60% of the profit, Disney spokesman David Caouette said. Disney last week said its film unit would have a fourth-quarter loss of as much as $300 million.
“The cost of movies is so great that sharing a little risk is not such a bad idea,” said Vic Hawley, a fund manager at Los Angeles-based Reed, Conner & Birdwell Inc., which owned 2.6 million Disney shares at the end of June.
“Flightplan,” which opened Friday and stars Jodie Foster, is the first film to be released under the partnership.
The partnership is Disney’s first film-financing venture since 1996, when Mariner Film Partners raised $200 million. In 1990, Disney raised $600 million through Touchwood Pacific Partners for movies such as the comedy “Father of the Bride.”
Disney first used partnerships to fund films in the 1980s under Chief Executive Michael Eisner, who set up a series of Silver Screen partnerships to make films, including “Down and Out in Beverly Hills.”
Kingdom Films raised $135 million in equity and $370 million in debt, Caouette said. Investors included hedge funds and insurance firms, said Natacha Rafalski, vice president of corporate finance at Disney.
CSFB’s DLJ Investment Partners II, a $1.6-billion investment fund, is the lead investor in Kingdom Films, CSFB spokeswoman Victoria Harmon said. She declined to say how much the fund put up or identify other partners. Rafalski and Caouette also declined to identify any of the investors.