Want to be a Hollywood highroller, but think you don't have the scratch? Think again! With banks and hedge funds fleeing for the exits, there's an opportunity to get on the ground floor financing films for major studios -- all at deep discounts that would make Costco blush.

Sue Zeidler for Reuters writes:

After some box office duds, such as Tom Cruise's "Lions for Lambs," and the credit freeze, most banks with the exception of JPMorgan have reduced their presence in Hollywood. Some are trying to sell off their positions in slate deals for discounts of 30 percent to 70 percent.

For example, Content Partners LLC backed by Mark Cuban and Todd Wagner is a pioneer in acquiring films in the secondary market from hedge funds, private equity firms and banks.

"Not only are we buying from financial sellers but we're also looking at transactions for the first time with studios and networks for participations in TV shows and film profits," said Content Partners President Steven Kram.

"We've already purchased 34 films and over 200 hours of television. We can provide a new source of financing for studios and networks who are being squeezed for every penny."

Another investor swooping in on slates of movie deals in Hollywood is David Molner, managing director of Beverly Hills, California-based Screen Capital International.

"I'm five times as busy as I used to be. We launched a $500 million fund that is financing the acquisition of assets in studio slate deals," said Molner. "We are taking the participants in finance deals out of their capital positions in studio slate deals."

That said, caveat emptor: Zeidler points out that "investors racked up hundreds of millions of dollars in losses and complained the studios tilted terms to keep sure-fire hit movies out of the slates." Cheeky devils!

Moody's Investors Services analysts Neil Begley said about $80 million in debt tied to Paramount's so-called Melrose I slate, covering films released from 2003 to 2005, including "Get Rich or Die Tryin'," may soon default.

"Based on the expected cash flows for the film assets, the Class A notes will not be paid in full by their legal final maturity," said Begley. Paramount declined to comment.

Bankers told Reuters that investors in Paramount's subsequent Melrose II film slate, with titles like "Blades of Glory," are now unloading their stakes.

Duly noted. Also: Watch out if anyone suggests that you become a "net profit participant." Like a funeral home that offers afterlife valet services, it's the most useless and cynical of good intentions. [Hat tip: The Business Sheet]

Heads up, everyone: Financing movies? If you're doing it because you like premiere invitations, that's a great idea. If you're doing it because you like money, gee... maybe try one of those nice CD accounts? Four investment groups with names that suggest they should know better (Allianz Risk Transfer, Marathon Structured Finance Fund LP, Newstar Financial, Munich Capital Markets) are suing Paramount Pictures, saying they lost their entire $40.1 million investment "by misrepresenting the risks of a private placement offering to finance Paramount movies.... Plaintiffs say Paramount induced them to invest by lying about its risk mitigation and/or by changing its risk mitigation techniques without informing them." The companies were part of Melrose Investors, a group of hedge funds that put up 18% of the capital for 26 consecutive Paramount movies in 2004 and 2005; in return, they were supposed to receive 18% of the money Paramount made from the movies.

Two former journalists believe PayPal donations will bring them the $3 million they need to complete "Not Evil Just Wrong," a documentary that takes on "global warming alarmists." The film's website (which, as of Monday morning, says it's received $1.6 million) describes it as "the most controversial documentary of the year" and "This is the film Al Gore and Hollywood don't want you to see." Not that there's a film yet to see, Harry McGee reports; the Irish Film Board called the unfinished doc "repetitive and creatively thin." Ann McElhinney and Phelim McAleer's first documentary, "Mine Your Own Business," was largely funded by a "mining company that wanted to develop an open pit gold mine in an impoverished village in Romania" and "contended that the actions of environmentalists were destroying communities and lives in developing countries." McAleer says the mining money did not compromise the film. "They saw what I had written [about the village] in the Financial Times and saw that I was representing it in a fair way. Also they had a good story to tell. They were the only people who could save this village from being destroyed by environmentalists." [Irish Times]

Not that this should surprise anyone, but the UK film industry can't find money, either. Hedge fund Aramid Capital, which Salamander Davoudi describes as "the most active investor in single-picture deals in the UK," is scaling back to "limit the element of risk," says Aramid chief exec Simon Fawcett. Chimes in Ivan McTaggart, director of film and media funds at Limelight, "We include ourselves in that.” Meanwhile, major UK lenders like Royal Bank of Scotland and Bank of Ireland are retreating. Says Future Film Group producer Stephen Margolis: “These were significant players to whom you would make regular phone calls... but they are withdrawing from the sector.” There's more, but it's all pretty standard-issue depressing. Click on the image for a look at British films in happier days. [FT]

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• Dollar gets stronger, hurts Hollywood [THR]

Penny-stock company Envit Capital Group has a "tentative" agreement with National Lampoon to fund a slate of "approved" projects, including "moderate budget feature films, P&A financing, video productions, and possible television development and production." Envit CEO Edward M. Laborio would like to point out that 80% of the entertainment industry's revenue comes from box office and rentals, that the U.S. has a 43% market share and that National Lampoon movies are DVD staples; HAL would like to point out that this press release sounds as if it was written in 2003. [BusinessWire]

RELATED
> Moody's downgrades Paramount's Melrose I funding to "speculative" [THR]
> Indie producer: "Some of my usual Wall Street investors laughed at me when I called" [iW]

Renegotiating that $1.6 billion in National Amusements debt? Not Easy. The first $800 million, due in December, isn't so bad since only half of the banks that made the loan have to sign off. But the second $800 million is a private placement made up of 55 institutions -- and they all have to give the OK. Says a Peter Lauria source (drily, one presumes), "Do you know how difficult it is to get 55 people to agree on anything?" Of note: Neither Sumner Redstone nor Phillipe Dauman are involved in the negotiations, since they're both directors at NA and at Viacom. Instead, there's a committee comprised of board directors George Abrams, David Andelman -- and Shari Redstone, who has not been getting on very well with her father of late. Question: Does anyone have the option yet on the inevitable Bryan Burroughs Vanity Fair article? [NY Post]

"My host, known as Abu Halaf, rolls his food in the palm of one hand while checking his Blackberry with the other," writes Sharon Waxman of her lunch with His Excellency Mahomed Khalaf al Mazrouei, otherwise known as chairman of the Abu Dhabi Media Corp. and creator of the $1 billion film fund that has already benefited Participant Media and National Geographic Films. Halaf tells Waxman that he expects his country to see a revolution in education, training and infrastructure. Halaf says he doesn't fear being criticized as he pushes Abu Dhabi into the modern age, quoting an Arabic saying that his spokesman translated as "The train has left the station." Writes Waxman, "Abu Halaf corrected him: 'No,' he said. 'It’s more like – 'The caravan is going to leave, while the dogs are still barking.' " [WaxWord]

The (ailing? flailing? need a new word for "miserable, migrane-inducing mess") economy will likely delay plans for an industry-wide $1 billion digital upgrade by Digital Cinema Implementation Partners. In a third-quarter earnings call, Regal Entertainment Group CEO Mike Campbell said, "We believe, and JP Morgan believes, that it will get financed once the market returns to something that is reasonably normal. We're going to continue to put together the pieces behind the scenes to be in a position to react."  [Knoxville News-Sentinel, via CinemaTech]

Sumner Redstone tells Merissa Marr that there's "not a chance" he'd sell CBS or Viacom in order to resolve the $800 million in debt issues surrounding National Amusements, their holding company. Nor will he sell any shares in CBS or Viacom, even though his negotiations with lenders continue and he says there's "no guarantee" that they won't go sour. A deal probably won't be reached for "several weeks," Marr says, adding that the situation might have been avoided if NA started talking with banks sooner. Said Redstone, "While I control National Amusements, I'm not involved with the day-to-day operations. Perhaps in the future I'll get more involved." [WSJ, subscription req.]

Well, it's nice that someone believes in us. Addison, Texas-based penny-stock company Earthworks Entertainment (PINK SHEETS: EWKE) has purchased an equity position in the upcoming Oliver Stone production “Escobar.” Said Earthworks president/CEO Steven Humphries, “This is our first of many acquisitions in the recession-proof entertainment and film industry.” The company's VP, James Reach, is producing "Escobar" with Stone; according to the announcement, Reach's credits include the 2007 Jessica Simpson vehicle "Blonde Ambition." Humphries also runs DealerAdvance, a company that provides lead management software for auto dealerships. [Business Wire]

Greg Maffei, chief executive of Liberty Media, told FT.com in a video interview that offshoot Liberty Capital "will be investing in a lot of debt" and that while many content companies still seemed like expensive acquisition targets, “There are plenty that look cheap. Viacom is a great example.” However, he said that Liberty probably wouldn't be exchanging a 103-million share stake in Time Warner in order to buy the dial-up AOL business. Said Maffei: “I think at the end of the day we’re probably not the right buyer for that business." Click here for video. [Financial Times]

RELATED
>> National Amusements seeks better debt terms as CBS, Viacom stocks tank [Reuters]
>> Rupert Murdoch on the prowl: News Corp. has a $5 billion “war chest” for acquisitions [Financial Times]

Under normal circumstances, a VC fund investing money is only a little more interesting than your cell phone losing reception: That's what they do. Of course, things financial are decidedly Not Normal, which is why Peter Kafka is bothering to report that Richard Wolpert, who runs The Mail Room Fund (founded in March by Venrock, Accel and WMA) has signed two term sheets for new investments. One was finalized Monday and beyond that there's no details such as who/what/where. Says Kafka, "We also spoke to an investor today who is trying to raise money. And that process, he says, is not going anywhere. Conclusion: If you think your startup is going to need money, best get your hands on it now." [Silicon Alley Insider]

National Geographic Entertainment has teamed with Imagenation Abu Dhabi to create a $100 million production fund that wants to "develop, produce, finance and acquire films that focus on people’s relationship to the world, their environment and each other." The fund plans to generate 10 to 15 films, budgeted between $5 million and $60 million, over the next five years. Says National Geographic Films chairman Jake Eberts, "I believe it is our moral obligation to use the power of film to bring people of different cultures together. Imagenation Abu Dhabi and National Geographic are ideally suited to do this." Imagenation, a division of the just-launched Abu Dhabi Media Co., announced a similar deal with Participation Media last month. [Business Wire]

>> RELATED: CNN to open Abu Dhabi broadcast hub in 2009 [Financial Times]

MGM says it will soon announce a new production fund. Carl DiOrio writes that it will be led by the Royal Bank of Scotland, with more than $500 million in financing and a $340 million revolving credit facility; the deal should be done in three to six weeks. DiOrio also says additional investment could come through Middle East financiers and Wall Street. [The Hollywood Reporter]

>> ALSO: MGM's looking for a Paula Wagner replacement to work with Tom Cruise; former Paramount production president Alli Shearmur turned down the  job, according to Michael Fleming and Tatiana Siegel. [Variety]

Specifically, the loan to Hoffman's Seven Arts came through Davis' production company, Too Easy Entertainment. Seven Arts announced the repayment via BusinessWire, much as it announced last week's repayment of $6.5M to the Cheyene Specialty Finance Fund. Release: "the repayment came from financing and distribution of films, as well as from film library revenues. No money was raised, no shares were sold, and no additional debt was incurred, to complete the repayment." Seven Arts and Too Easy were producers on 2005's "Asylum" starring Natasha Richardson and Ian McKellen.

>> PREVIOUSLY: Peter Hoffman's Seven Arts Pictures repays $6.5M debt to hedge fund

Sources say that Merrill Lynch, which has its own problems, "is looking for any event that might trigger a default on the loan -- such as, say, the removal of Paula Wagner -- "and open the door to renegotiations," if not getting rid of the deal altogether. Technically, Wagner's exit didn't change the terms since Tom Cruise remains in place, but the sentiment leaves little chance that MGM might be able to use that $500M to finance its own slate. Back at team Lion, "MGM has retained Goldman Sachs as a strategic adviser to raise equity for film financing as well as other alternatives, including a potential sale of the famed studio, according to three people involved in or close to the situation." [NY Post]

Meanwhile, a group of "Valkyrie" extras say they plan to sue UA for up to $11M in connection with injuries sustained a year ago when they fell off a truck during shooting. UA says there were cuts and bruises; the extras claim concussions and head lacerations. [Infos Jeunes]

The money was owed to Cheyne Specialty Finance Fund, part of troubled U.K. hedge fund Cheyne Capital. Says Hoffman: “We are very pleased that cash flow improved our balance sheet so dramatically in the quarter ending June 30th that we were able to repay Cheyne without any dilution to shareholders. We expect to announce further improvements to the balance sheet shortly.” [BusinessWire]

Hilary Lewis is counting the seconds and has a timeline to back up her claim that "since the end of July, an article a week has come out predicting that DreamWorks deal with Reliance was just days from being announced." [Business Sheet]