Step Aside, Captain America

They don't wear skin-tight suits or have supernatural powers, but a group of lawyers performed some magic recently for Marvel Enterprises. Attorneys at Liner Yankelevitz Sunshine & Regenstreif helped the company raise $525 million to finance 10 films based on Marvel's comic book characters. They did so by crafting an unusual structure in which a group of assets -- the movie rights to 10 Marvel characters -- were taken out of Marvel and assigned to a new company.

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They don’t wear skin-tight suits or have supernatural powers, but a group of lawyers performed some magic recently for Marvel Enterprises Inc. Attorneys at Liner Yankelevitz Sunshine & Regenstreif helped the company raise $525 million to finance 10 films based on Marvel’s comic book characters. They did so by crafting an unusual structure in which a group of assets — the movie rights to 10 Marvel characters — were taken out of Marvel and assigned to a new company. That company issued debt, which was secured by the motion picture rights, to finance the movies. “It’s an innovative structure because the repayment of the debt comes from profits of the movies based on these characters,” said Joshua Grode, a partner in the firm’s Los Angeles headquarters who led the transaction. “It’s collateralizing a future revenue stream. That’s the innovation.” Grode said this kind of structure has been done on a picture-by-picture basis but never involving a slate of films. The lawyers also were able to insure the entire debt, which Grode said had never been done before. While insurance companies insure revenue stream once a movie is completed, “no insurer has insured the production of a movie,” he said. Grode said it took a year to pull the financing together. Marvel is now starting to hire writers and companies to produce up to 10 movies featuring Captain America, Nick Fury, The Avengers and other Marvel characters. While Marvel plans to do live-action movies, Grode said the company has the right to do animation if it wishes. The transaction “enables Marvel to form a film studio and produce films based on its characters rather than license rights to its characters” to other studios, said George Kalikman, a partner in Liner Yankelevitz’s San Francisco office who worked on the deal. “It was really a lawyer’s paradise to work on this kind of deal,” Kalikman said. “We dealt with quite a number of unique issues that made the deal intellectually stimulating and a lot of fun.” The $525 million nonrecourse debt facility consists of $465 million in revolving senior bank debt and $60 million in mezzanine debt. Ambac Assurance Corp. has insured the senior debt and MVL Film Finance LLC, a special purpose, bankruptcy-remote indirect subsidiary of Marvel, will be the borrower under the facility. Grode also helped negotiate and structure Marvel’s agreement with Paramount for distribution of the 10 films. The Liner team also included senior counsel Bertha Willner and associates Paul Swanson and Julie Stewart.

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