Universal, Relativity extend financing partnership (Reuters)

LOS ANGELES (Reuters) - Universal Pictures and Relativity Media LLC on Wednesday said they nearly tripled their co-financing deal to between $2.5 billion and $3 billion, as Hollywood keeps making deals amid Wall Street's chaos.

The deal between Relativity and General Electric Co's Universal -- increased from $1 billion -- comes on the heels of two film financing deals last week, one for Steven Spielberg's DreamWorks SKG and one for studio Media Rights Capital.

"Our deal has been very profitable to date," said Ryan Kavanaugh, chief executive officer of Relativity Media, which has structured and consummated more than $4.5 billion in Hollywood production slate financings.

Universal and Relativity first announced in February that they had reached a $1 billion co-financing deal to fund 75 percent of Universal's films through 2011. The deal now covers 10 to 15 films per year through 2015.

Studios have seen hedge funds, which poured $15 billion into Hollywood over the last three years, retreat in the current credit crunch, but bankers say entertainment companies are continuing to access capital through deals with more stringent terms to better protect backers.

"Money is still flowing into Hollywood, but with greater protection against risk, given the recent market turmoil," said Harold Vogel of Vogel Capital Management in New York.

Last week, J.P. Morgan led a $700 million debt financing for India's Reliance ADA Group to help fund its new venture with Steven Spielberg and the DreamWorks SKG team.

J.P. Morgan also led a $350 million financing for Media Rights Capital, the independent studio behind a new Cameron Diaz movie called "The Box."

"In a credit climate that on its surface has completely shut down, this financing proves that there is money available to strong companies operating with sound business strategy and deliberation," said Marni Wieshofer, Media Rights' senior vice president of corporate development.

Walt Disney Co recently said it sees no problem finding new investors in a down market but may not want to share profits or ownership going forward and has not yet decided whether to turn to outside film financing again when its Kingdom Films LLC deal runs out in mid-2009.

The deal with Kingdom Films, set up in 2005 by Credit Suisse First Boston, raised $505 million to foot 40 percent of the production and distribution costs for 32 films.

Reuters/Nielsen