In a sign of how dramatically the independent film business has changed, the Film Department on Monday filed for a public stock offering worth up to $85 million to pay debt and expand into distribution and marketing.
The small film financier, which was founded in 2007 by industry veterans Mark Gill and Neil Sacker, has released only one movie while racking up $34 million in losses and more than $40 million in debt, according to its initial public offering registration.
The firm raised $200 million in 2007, when capital markets were flush, with a goal of producing four to six movies per year. Those ambitious plans fell short for reasons including the Writers Guild of America strike, increasing production costs and the bad economy, the filing said.
The one movie the Film Department released, "Law Abiding Citizen," grossed a solid $72 million domestically. It has not struck a domestic distribution deal for the other movie it produced, "The Rebound," starring Catherine Zeta-Jones.
The Film Department said in its filing that it defaulted on debt payments last summer, which led to the termination of a $140-million revolving credit facility it was using to finance movies. It plans to pay off its remaining debt with $36 million from its IPO, as well as stock.
Today there are far fewer independent film financiers than just a few years ago, and major studios have cut back or closed highbrow divisions.
The Film Department is looking to improve its fortunes by distributing and marketing its own pictures. It signed a deal with former Paramount Pictures marketing president Gerry Rich to spearhead that effort as vice chairman. His contract takes effect, however, only if the company is able to raise substantial new funds. In addition to the IPO, the Film Department said it was looking to raise an additional $157.5 million in new debt to fund marketing and distribution expenses for future movies.
The IPO comes after the Film Department unsuccessfully tried to recapitalize itself over the summer, according to the filing. One expert said that investors will probably be cautious about the latest proposal.
"It is typically pretty difficult for a company without an expansive track record in the media business to raise money in the public markets," said David Bank, managing director of global media and Internet research for RBC Capital Markets.