The $200 million slate financing deal between Texas private equity fund Lone Star and Sony Pictures was killed by a string of flops, a dispute over “Ghostbusters” and a disastrous meeting in which studio boss Tom Rothman plunked his feet on the desk of Lone Star’s president, multiple individuals with knowledge of the situation told TheWrap.
Lone Star subsidiary LStar Capital agreed on the multi-year slate finance deal with Sony in 2014, but after the departure of former Sony film chief Amy Pascal and Sony Entertainment CEO Michael Lynton, the two sides began to develop a serious disconnect personally and financially. That has led to the dissolution of the fund just days before LStar was due to pony up eight figures for the studio’s “The Emoji Movie,” the individuals said.
The arrangement officially ends at midnight, but it has been dead in the water for days, TheWrap exclusively reported last week.
“Lone Star has been a great partner for several years and as anticipated, the deal has concluded — and on a high note,” a studio spokesperson told TheWrap in a statement. “The decision to part ways was mutual, and won’t impact the studio’s plans or our strong slate of upcoming films moving forward.” LStar did not respond to multiple requests for comment.
Battered by a series of box office misfires, LStar began approaching other parties about three months ago to take over its financing arrangement with Sony — but found no takers, an individual close to one of those parties told TheWrap. DMG Entertainment walked away last week although the Beverly Hills-based company may re-materialize if the terms of the deal change.
And with “Emoji” funding due by midnight tonight and the animated film due in theaters on July 28, time is quickly running out for Sony to line up a replacement backer, the individual said.
That insider said that LStar’s deal allowed the financier to fund projects picture by picture, which an individual close to the studio also confirmed was the case.
However, the first individual said that LStar could only opt out of financing two of the studio’s films during the run of the deal, and the financing company used its two get-out-of-jail-free cards early on — including on last year’s $144 million flop “Ghostbusters.”
As a result, the company was forced to pony up for a string of box-office duds, including “The Brothers Grimsby,” “Life,” “Concussion” and last December’s “Passengers.”
Tuesday’s deadline to finance a 25 percent share of Sony’s $50 million “Emoji Movie” — an estimated $12.5 million check — is the official drop-dead moment for the financing deal. It’s unclear if LStar will pay any penalty for defaulting or how much it has already invested in studio films under the deal.
LStar was also committed to financing 25 percent of the $20 million reboot of “Flatliners” and three upcoming animated films: the $18 million holiday movie “The Star,” the $50 million Beatrix Potter adaptation “Peter Rabbit,” and the $65 million “Hotel Transylvania 3.”
An individual close to the studio told TheWrap that Sony was not counting on LStar’s funding, has other partnerships on “Flatliners” and “The Star,” and claims to be relieved not be giving away “pure profit” on “Hotel Transylvania 3.” The individual said the studio is pursuing options to help finance its future films, including deals for slates or individual titles.
And while the individual close to the studio said LStar still wants to work with Sony despite the performance of its recent film slate, three others with knowledge of the deal disagree.
According to one insider, Sony Pictures Entertainment Motion Pictures Group Chairman Tom Rothman got off on the wrong foot — literally — with Lone Star President Sam Loughlin.
Rothman, who replaced Pascal as film chief in February 2015, visited Loughlin in his Dallas office about 18 months ago. “Went down there — totally disrespected Sam, put his feet up on [Loughlin’s] desk,” the individual said. “Horrible meeting.”
Another individual added, “There’s real animosity between the two sides.”
The hostility wasn’t just about manners. Rothman fumed at LStar’s decision not to finance “Ghostbusters” and tried to push back using surefire hit “Spider-Man: Homecoming” as a hammer, according to two individuals with knowledge of the situation.
Ultimately, insiders said that LStar did retain an equity interest in the Marvel superhero revival, which is one of the studio’s rare box office hits: The $175 million reboot has earned $467 million worldwide in its first two weeks of release.
Since deciding to stop new investments, LStar has been shopping the library of its 25 percent equity stake in the dozens of films it financed. But given the poor box office performance of many of the films — and LStar’s lack of leverage — at least one insider expects it to sell at a significant discount.
By leaving the slate finance deal, LStar also will not be participating in some of Sony’s anticipated future hits, including “Spider-Man: Homecoming 2” and Tom Hardy’s “Venom.”
Sharon Waxman contributed to this story.