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DUFF & PHELPS BELIEVES TURNER BROADCASTING ACQUISITIONS TO RAISE RISK PROFILE

 CHICAGO, Aug. 19 /PRNewswire/ -- Turner Broadcasting has agreed to acquire Castle Rock Entertainment and New Line Cinema, primarily for stock. For Castle Rock, Turner will pay $100 million in cash or stock for the production company, retire a total of $61 million of debt owed to investors Sony and Westinghouse and assume $100 million of bank debt secured by the company's future feature film and television productions. New Line will be acquired for stock plus $70 million of assumed debt. Including assumed and refinanced debt, the overall cost of the two acquisitions is about $900 million.
 Both Castle Rock and New Line are film producers with the former emphasizing big-budget pictures and the latter medium- and low-budget pictures. Also, New Line has a distribution arm including the worldwide video and foreign rights from Castle Rock (agreement ends in 1994). Importantly, Castle Rock owns only the free television rights to its films, with Sony (Columbia Pictures) handling theatrical releases and Showtime owning the pay television rights. Over time, these Castle Rock rights will return to the company.
 What Turner gets in return, we believe, is access to talent and product including film libraries and expanded distribution via New Line. The talent and product is particularly important in order to feed Turner's cable networks with newly produced films as well as that from the libraries (when agreements permit).
 It should be pointed out, however, that Turner already produces films, primarily in the low budget category. This strategy was designed to produce non-theatrical films for the Turner cable networks and to minimize financial risk. Thus, the purchases of Castle Rock and New Line represent a decided change in strategy. Moreover, Turner has indicated that production will be stepped up at both Castle Rock and New Line thereby increasing demands for capital. Also, it was well known that Castle Rock was in search of funds for production activities prior to the acquisition.
 By moving up the cost-of-production ladder, Turner has increased its business and financial risk profiles, even with controlled outlets. Movie making is a high risk, volatile business. Moreover, past creative and financial success in making movies is not a guaranty of the same in the future.
 Turner Broadcasting System's securities are currently rated as follows: senior notes 'BBB-' (Triple-B-Minus), senior subordinated debentures 'BB+' (Double-B-Plus), zero coupon convertible subordinated notes 'BB-' (Double-B-Minus), and commercial paper Duff 3.
 -0- 8/19/93
 /CONTACT: W. Dudley Heer of Duff & Phelps Credit Rating Co., 312-368-3123/
 (TBS)


CO: Turner Broadcasting System ST: Georgia, California IN: ENT SU:

SM -- NY051 -- 4373 08/19/93 13:49 EDT
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Publication:PR Newswire
Date:Aug 19, 1993
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