Hobbits thwarted again?

Peter Jackson and New Line finally seem to have kissed and made up and now the film adaptation of The Hobbit is in jeopardy again because of subprime? WTF?!?!

Wednesday afternoon, the Financial Times published a scoop breaking the news that funding for a slate of upcoming blockbuster movies may be delayed because of Wall Street’s current woes.

The studio in question is MGM: The movies on the list include “The Hobbit” and the next installments in both the Terminator and James Bond sagas.

It seems that in recent years Hollywood has moved to a relatively new financing model in which it raises funding for a slate of upcoming films by having investment banks tap the pockets of private equity funds, hedge funds and institutional investors. In this case, MGM had contracted with Goldman Sachs and Deutsche Bank to raise as much as a billion dollars.

But all these heavy hitters play with other people’s money, and right now, the cost of borrowing that money has shot up. Access to credit has withered. Buyout and merger action has come to a screeching halt. The initial impetus for this crunch came from homeowners failing to make their mortgage payments, but the damage is spreading far and wide.

I’m sure our resident economists even understand what that actually means. I think in layperson’s terms though it translates down to more delays. Grrr! Argh!