Thursday, July 22, 2010

[MISP] Albuquerque Studios seeks to reorganize

Albuquerque Studios seeks to reorganize

Economic downturn, writers strike take toll on film industry


An embattled movie studio in Albuquerque hopes to ride out the recession and avoid the auction block through a restructuring and bankruptcy deal announced Wednesday.

Recent reports that Albuquerque Studios was headed for foreclosure were put to rest — for the moment — when the parent company, Pacifica Mesa Studios LLC, announced Wednesday that it had filed a petition for Chapter 11 bankruptcy court protection in cooperation with Amalgamated Bank, its main lender.

The eight-soundstage studio, which opened about three years ago in the Mesa del Sol subdivision south of the Albuquerque International Sunport, serves as home base for the television series Breaking Bad and Scoundrels.

"I'd say there is no impact to our operations," Wayne Rauschenberger, the studio's general manager, said Wednesday. "This is a restructuring of the relationship between the home office and the lender and their financing arrangement. So for us it is pretty much business as usual. We are paying bills and doing all the normal stuff we do."

Studio CEO and chairman Hal Katersky said by phone Wednesday that "the economy has had a big effect, not only on us but on the Hollywood studios."

Rauschenberger also noted the industry slowdown, saying, "Right now everybody is a little antsy with the economy, and they are not quite as freewheeling with the movies these days. They are taking a lot more time in planning and in calculating what the risks are and that sort of thing. The decision-making seems to be rather slow. We have projects on the board that are working titles with major studios, and next year looks like it could be a strong year."

Katersky — who confirmed that the Dreamworks' production of Fright Night (a remake of the 1985 vampire film) is using the studio — said the financial restructuring puts the studio "in a much better position for the future."

Katersky declined to discuss specifics about the studio's finances but said it is working to attract filmmakers with the goal of moving out of Chapter 11 reorganization "very soon ... much, much sooner than a year from now."

Eric Witt, the governor's director of legislative/political affairs and media arts and entertainment development, said the studio's problem isn't based on management but on the way the owners structured the financing. Though he didn't know the specifics of the deal, Witt said a reported outstanding debt of roughly $95 million indicates a need to make a monthly bank payment of several hundred thousand dollars.

Rauschenberger said the studio is paying its vendor bills but that once construction stopped at the site, "You have to convert out the loan into a regular loan, and anybody who built property over the last five years is in the same boat. You build a piece of property that cost X and now it is worth less than X, and you're standing at the bank trying to borrow enough money to pay off the construction loan. That is tough to do. There is no secret that they (the studio) have not been paying the mortgage."

Whether the move signals a problem for further developing New Mexico's film-industry infrastructure remains unclear. The state still boasts one of the country's most attractive film-incentive programs, with a package that includes no-interest loans, 25 percent tax rebates on production expenses incurred in the state, a 50 percent wage reimbursement for on-the-job training of New Mexicans in advanced crew positions, and no state gross receipts taxes on production costs.

So far this year, the state has attracted such high-profile productions as True Grit, Thor and Cowboys & Aliens (which is still shooting). "I feel we are in better shape than we have been in a year," New Mexico Film Office Director Lisa Strout said this week.

She said Albuquerque Studios has been hit by a combination of unexpected factors, including the nationwide downturn in the business, global economic disruption and the Writers' Guild of America strike of 2007/2008, which started shortly after the studio opened.

On the upside, early last year the cable-TV entity ReelzChannel moved its business from Los Angeles and Minnesota to Albuquerque Studios. ReelzChannel General Manager Stan E. Hubbard said Wednesday that New Mexico's "booming film business" and tax incentives drew the company here.

"Everything is open and everything works and everything is functioning" he said of the studio. "This is really a world-class facility and it's rather empty right now because people are afraid of the unknown. Hopefully, with yesterday's announcement of the restructuring plan, people will have confidence they can make a movie here and it won't be interrupted."

But aside from its publicized financial challenges, the studio, via Pacifica Mesa, is also involved in a lawsuit against the studio's former chief operating officer, Nick Smerigan.

The Associated Press reported in April that the lawsuit alleges Smerigan was channeling film projects to an unnamed competitor and was in fact employed by that competitor before he officially left Albuquerque Studios in January.

In June, the state of Mississippi announced that as part of its film incentive program (which started in the spring of 2008), it was building the Mississippi Film Studios — to be run by Smerigan.

Calls seeking comment from the Mississippi Development Authority, which administers the film program, were not returned. Smerigan was not reachable, and a phone call to his wife, Gail — who acted as his spokeswoman at Albuquerque Studios — was not returned.

"All we know is what we've read in the paper and seen in the lawsuits — the alleged redirection of films to Mississippi or Alabama or some Southern state," Witt said.

Meanwhile, developers of a local project called Santa Fe Studios are waiting for the state Economic Development Department to approve a $10 million economic development grant before beginning construction at a site south of Santa Fe. The project initially was slated to break ground this past spring.

Though the developers received a $10 million loan from Los Alamos National Bank, the project has also been stymied by a lawsuit filed by three Santa Fe businessmen who alleged that a Santa Fe County government deal with the studio developers violated the state constitution's anti-donation clause



Confidentiality Notice: This e-mail, including all attachments is for the sole use of the intended recipient(s) and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited unless specifically provided under the New Mexico Inspection of Public Records Act. If you are not the intended recipient, please contact the sender and destroy all copies of this message. -- This email has been scanned by the Sybari - Antigen Email System.

No comments: