Gun Hill Road Securitization Receives Positive Reviews Amid Follow-Up Transaction Plans

Strategic Insights -

The securitization of film copyrights, known as Gun Hill Road, has garnered positive feedback from industry experts after Deutsche Bank underwrote the transaction in January. The $600 million deal, which covered 18 feature films from Sony Pictures and Universal Studios, is set to be repaid through revenue from domestic and international theatrical releases, pay-per-view screenings, and home video and DVD releases. Analysts, including Olga Filipenko from Moody's Investors Service, have praised the transaction's structure, which allows the studios to retain creative control and worldwide distribution rights. A follow-up transaction, Gun Hill Road II, is set to price this month, with an estimated $1.4 billion in production costs covering approximately 20 films.

Key Takeaways:

  • The Gun Hill Road securitization received a Baa2 rating from Moody's Investors Service for its senior tranche.
  • The transaction, which financed 18 feature films from Sony Pictures and Universal Studios, is expected to be repaid through revenue from various release channels.
  • Gun Hill Road II, a follow-up transaction, will tap the capital markets for about $700 million and cover an estimated $1.4 billion in production costs for approximately 20 films.
  • The trust will issue $315 million to finance nine Universal Studios films and $385 million to bankroll 11 movies from Sony Pictures.
  • The studios involved in the securitization, including Sony Pictures and Universal Studios, will retain creative control and worldwide distribution rights to their films.
  • Moody's analyst, Olga Filipenko, praised the transaction's structure, which allows studios to maintain control while benefiting from the securitization process.

Statistics:

  • The Gun Hill Road securitization has a total size of $600 million.
  • The follow-up transaction, Gun Hill Road II, is aiming to raise $700 million.
  • The estimated $1.4 billion in production costs for approximately 20 films will be covered by the trust.
  • The trust will issue $315 million to finance nine Universal Studios films.
  • The trust will bankroll 11 movies from Sony Pictures for $385 million.
  • Moody's assigned a Baa2 rating to the senior tranche of the Gun Hill Road securitization.

Sources:

  • Asset Securitization Report, (c) 2006
  • SourceMedia, Inc. (Publishers of Asset Securitization Report and http://www.asreport.com)
  • Moody's Investors Service (Olga Filipenko, Assistant Vice President)