Wednesday, August 07, 2013

Easy Credit

It's in the form of corporate bonds from a Glendale animation studio.

DreamWorks Animation SKG, Inc. announced today that it has priced its previously announced private offering of $300 million aggregate principal amount of a new series of senior notes due 2020 (the “Notes”).

The Notes will have an interest rate of 6.875% per annum and will be issued at a price equal to 100% of their principal amount. The Notes will be unsecured, unsubordinated obligations of DreamWorks Animation and will be guaranteed by the Company’s existing and future domestic subsidiaries that guarantee the Company’s credit facility. The closing of the offering is expected to occur on or about August 14, 2013. ...

It'll be interesting to see what kind of credit rating DWA's bonds get. A? Double A? Something lower?

Years ago, when Jeffrey Katzenberg was studio top-kick at Disney, the House of Mouse put out a number of Limited Partnership deals where people with money to burn could purchase pieces of Disney's movies. These weren't bonds, but small stakes in feature product. The units were titled Silver Screen Partners. Silver Screen Partners I was quickly sold out, and quickly followed by Silver Screen Partners II, III, IV, etc.

The first issued units of Silver Screen Partners helped finance a group of feature films that turned out to be highly profitable. Too profitable, as far as Disney was concerned, because people who bought SSP I made goodly sums of money. So subsequent "Screen Partnerships" were engineered so that the people who bought them wouldn't make out half as well as Disney's first-generation Silver Screen "partners" did.

The DreamWorks offering is a bit different. DreamWorks is only paying interest on unsecured bonds. There's still plenty of risk, but not as much (possible) reward.

Hollywood moguls aren't stupid.


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