Chicago, IL (PressExposure) October 03, 2007 -- Recently, CITIGROUP financed Relativity Media's global film fund in excess of $1 Billion dollars. The fund's manager, Ryan Kavanaugh, is 32 years old and has raised more than $4 Billion dollars for film finance in the last few years from other institutions such as Merril Lynch and Deutche Bank. Thomas Tull, the founder of Jackson Hewitt Tax Services recently closed a $2.5 billion dollar deal with Dresdner Kleinwort and Columbus Nova Asset Management for his Legendary Pictures Film Fund. GE CAPITAL recently was the lead arranger for a $200 million film fund lead by production executives Mark Gill and Neil Sacker and whose investors also include Sheikh Waleed Al Ibrahim, Zeid Masri of SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly, and Rafael Fogel. Numerous other private equity groups and hedge funds are also bankrolling other film deals.
While the dollar amounts are significant and the structures seem to be identical in leveraging junior equity with tranches of mezzanine and senior debt, there is one question that still remains? Who gets their money back if the deals and funds flop?
A Chicago film finance and production company, Noci Pictures Entertainment, may have answered the last question. "Everyone", states the firm's visionary President Yuri Rutman in regards to a $1 billion dollar film deal where 100% of principal capital can be guaranteed, exclusive of profits spread out among 40-100 films.
Without any formal Ivy league MBA degrees or tenures on Wall Street or in Hollywood studios, Mr. Rutman spent many sleepless nights self-educating himself the A-Z's of what they don't teach you in practice at business or film school. Leveraging the international structure of film finance with the nuts and bolts of private equity, collateralized debt obligations, tax credit incentive finance, hedging strategies, and multiple exit scenarios, Mr. Rutman, a filmmaker and actor who also spent more than a decade as a top commercial real estate consultant and entrepreneur in Chicago has come up with a formula that is attracting a lot of interest from institutional investors, hedge funds, capital markets, investment banks, high net worth investors, and other global private equity groups.
"I am not reinventing the wheel in trying to raise money to fund my passion and the aggressive interest of film finance by many global investors and financiers", Rutman states. "I am just doing it in regards that in the last 30 years, a lot of private equity money has flowed into Hollywood, but only a nominal amount of it stayed and made any significant returns for Wall Street and Main Street alike. I just happen to want to stay for long term and what's the point of betting on one horse if I can guarantee an entire breed".
Rutman is no stranger to raising capital in an innovative fashion for film finance. A few years ago he met a VC investor on the Internet who read his business plan and wired him money a week later without ever meeting him. The result was a small, but very well received independent film, "Mr. Id", which is currently one of the top downloaded films online at such sites as Brightcove.com and Vuze.com.
"I thought with "Mr. Id", the investments would continue to roll in. But I realized I had to do go above and beyond what anyone has ever offered to investors and it took me years to figure out how to do it".
Rutman further states that having a firm studio distribution deal for his fund would actually limit the upside of profits and revenues. While a lot of funds are structured in conjunction with a major studio, a few are being done without being married to a particular one. "Working in Chicago real estate and being a trained negotiator, what's the point of using my skill set and everything I learned if I can't apply that in Hollywood? I am used to shopping real estate deals on a property by property basis to the highest bidder, why not do the same thing with studios and other distributors and be in control of the situation?"
The key factor is that the major studios are in fact primarily now in the business of distributing externally financed films, so creating long term value for A-level films with A talent becomes an economy of scale as well as the creative merits and control of a movie.
Part of that control is that Rutman has written several of the scripts for the film fund himself. "Kiev Nites" is a crime epic about a boy who comes to Chicago in the early 1970's and is growing up to be a violinist. Something goes wrong and he ends up being an enforcer for a crime family and after ten years he wants to get out. With the historical success of crime films at the box office ranging from "The Departed", to "Goodfellas", "Godfather", and the tv show, "Sopranos", the timing may be right for another international crime film hit. "My tastes run from wanting to do edgy crime dramas to thrillers ,action, horror, kids movies, etc., to doing a movie based on the real historical facts and spiritual significance of the Exodus and how it applies to all denominations and beliefs without taking sides" .
"I am in a unique category because one side I am no different that the creative filmmaker who stays up all night writing scripts and takes his final movie to Sundance or Cannes and sells it to a studio. On the other hand, I understand and am conscious of private equity and maximizing investor returns, can negotiate with the Hollywood werewolves, and still be able to sleep at night knowing that I utilized an ethical and conscious approach to making something happen and protecting someone's money 100%".
The Company is currently reviewing numerous proposals from various global partners including investment banks, hedge funds, private equity groups, and other investors.
Rutman is also becoming too familiar with "fishermen" who are more interested in his proprietary business model than in actually investing.
"There are so many individuals out there who claim they can structure the deal or provide a significant capital infusion, , but I think their hearts are in the wrong place. I want to make sure I partner up with someone where we are both of the same consciousness to succeed on a win-win basis. This is my life's passion and I am not looking to do a fly-by night venture with someone who isn't on the same frequency as me and wants to do a quick vanity fix and move on. A lot of the heart and soul has been taken out of movies lately and if I can resuscitate that with a financial partner who is also conscious of how positive entertainment can influence the world proactively, it will only increase the upside profit potential as well".