The press has been far more eager than DCIP to announce completion of its funding and its readiness to rollout. Both the Los Angeles Times and the Wall Street Journal published articles this month of a pending announcement. The one announcement that did occur, though, was by Amy Miles, CEO, and David Ownby, EVP and CFO for Regal Entertainment, in their February 16 earnings call. Amy and David provided significant insight into the funding arrangement behind DCIP.
Not said in the earnings call is the rumor that last minute agreements with Sony, both studio and electronics company, must still be signed. If so, such agreements could reflect requirements imposed by the many banks involved in the syndication of the bond.
According to both Regal and WSJ, $445M in debt and $215M equity was raised. While no screen count was given, this could be used to fund equipment for up to 10,000 screens, out of the total 16,000 screens now operated by DCIP’s owners. Regal did say that they expect the funding to cover up to 70% of its screens. Deployment agreements generally require 100% conversion within a specified time, so it’s likely that this money will concentrate on converting entire complexes, and not just installing 3-D everywhere.
From another document, the borrower for the $445M is listed as Kasima LLC, an indirect subsidiary of DCIP. The $215M, according to Regal, consists of $80M of combined funding from the three exhibitors, and junior capital of $135M. Presumably the $135M was raised through the private sale of shares in Kasima. The $80M from the exhibitors is paid through a combination of cash and existing digital cinema equipment purchases. In addition to the funding, DCIP will collect a $1000 per year per screen licensing fee throughout the term of the VPF contracts, presumably for providing VPF management.
The indirect arrangement between Kasima and DCIP could allow the exhibitors to jettison DCIP in favor of a more competent service provider. The distance between companies helps explain why DCIP has been tolerated in spite of its bungling of software development. One possibility is that the DCIP umbrella could be extended to cover Chinese-walled IT departments within each of the three exhibitors, which collectively would be more than competent in managing the invoicing and collection of VPFs.
