Indie movie producer Film Department Holdings Inc. is pushing ahead with plans for an initial public stock offering this month, the brokerage underwriting the deal said Monday.
Mike Witherill, who heads underwriter IPO Solutions in Phoenix, declined to discuss the specifics of the offering, citing federal rules. But he said there were "no issues" holding it up.
The IPO, announced in early December, will test the public's appetite for a fledgling filmmaker: West Hollywood-based Film Department has just two movies under its belt and says it will need to secure substantial additional financing, beyond the IPO proceeds, to keep going.
The deal will be a big test for IPO Solutions, too: The firm, a new online underwriting unit formed by little-known Girard Securities in San Diego, has no prior experience marketing a stock offering. It's primarily expecting to attract individual investors to the deal -- which suggests that big-money institutional investors aren't biting.
Film Department hopes to sell 6.5 million shares for as much as $14 each, raising about $90 million.
The company was founded in June 2007 by industry veterans Mark Gill and Neil Sacker. Gill, 47, was president of Warner Independent Pictures from 2003 to 2006 and before that had stints at Stratus Films, Miramax Films and Columbia/Tri-Star Pictures. Sacker, 48, previously held posts at Yari Film Group, Miramax and Warner Bros.
Film Department had planned to produce as many as six films a year, but says it had to curtail its ambitions in part because of the Writers Guild of America strike in 2007-08 and surging movie production costs.
Its two films produced to date are "Law Abiding Citizen," starring Gerard Butler, which the company says has grossed $100 million worldwide since its October release; and "The Rebound," with Catherine Zeta-Jones, which is scheduled for summer release.
In the prospectus for the IPO, Film Department touts itself as having "demonstrated an ability to develop, produce and sell star-driven, moderate-cost, studio-quality films." The company also is pitching its business model as risk-averse: Film Department expects to cover at least 80% of its films' budgets by licensing them in advance internationally.
Yet the company struggled with financing last summer. Part of the proceeds from the IPO would be used to pay down $29.5 million in accumulated debt.
The firm also estimates that it needs $157.5 million in new credit to pay for distribution and marketing of its near-term film projects.
"We require additional financing, and without it we may have to limit or discontinue our operations," the firm says in the prospectus.
Caveats about risk are standard in IPO documents, but Film Department's warnings remind investors that the IPO would fill just one part of its money needs.