May 19, 2008

The True Story of a Script, Big Dreams and Vanishing Private Equity
By BROOKS BARNES LOS ANGELES Last September, when Sanjay Sanghoee set about turning his first novel into a Hollywood movie, the budding filmmaker had his pick of investors. The novel, Merger, a corporate thriller with an international espionage twist, was quietly published in 2005. Mr. Sanghoee saw the movie version as a $5 million to $7 million indie with broad appeal, maybe attracting a star like Jake Gyllenhaal. But so many hedge funds and private equity investors wanted to sink money into the project that Mr. Sanghoee, himself holding down a day job at a New York hedge fund, pushed the needle higher. Soon the budget had tripled to $15 million. In October, he decided against a fund-raising trip to Dubai. We dont even need it now, he said in an interview at the time. But that was before Wall Streets mortgage mess, tight credit markets and the sour economy and before a parade of poor box-office results for investor-backed films. The torrent of private money flowing into Hollywood slowed to a trickle. Mr. Sanghoee now finds himself panning for gold in a very different stream. Investors for Merger have either slammed on the brakes or disappeared altogether. A fund in Atlanta weighing a $7.5 million investment has cut back by $3 million. A $5 billion hedge fund group that was supposed to handle debt financing now has other priorities, namely liquidating 80 percent of its holdings. Things have gotten a bit hairy, and unexpectedly so, Mr. Sanghoee said. Mr. Sanghoee has been caught in the lurch of an uncertain economy and nervous lenders, like many other aspiring filmmakers, as private money has become harder to obtain.

Outsiders seeking a klieg-lighted life have always populated the movie capital. But over the last two years, as an estimated $12 billion in private deals has pumped money into movie production, achieving that dream became easier. Anybody with a little moxie and a few contacts could get some so-called dumb money and hang out a film shingle. The spigot has not been completely turned off. Although there are no hard numbers on the amount of private equity now in Hollywood it is private, after all independent producers with distribution deals are still obtaining financing, albeit with difficulty. The bubble for upstart producers like Mr. Sanghoee, however, seems to have popped. But dreams die hard in Hollywood. Mr. Sanghoee, a balding 35-year-old who wears a silver pinkie ring and Versace eyeglasses, urgently wants to trade his Midtown office for a poolside cabana. Rather than giving up, he is overhauling his financing plans and retooling his pitch to investors. From the start, he knew what to name his production company: Relentless Pictures. The logo, he decided, would be a man rolling a boulder up a hill. Starting a New Career In 2005, when a division of Macmillan published Merger, Mr. Sanghoee (pronounced SANEgo-ee) had a decision to make: try to option the film rights to a producer or seek investors to make a movie himself. Finding his own investors didnt seem far-fetched. He had managed to get a book deal without any experience, and the book landed some decent reviews. (Glamour, gore and more, said Barrons.) Besides, he noticed that there was something in the zeitgeist about outsiders coming to Hollywood: even a story line on The Sopranos involved two characters lining up investors for a slasher picture based on their mobster experiences. Whats Tony Soprano got that I dont got? Mr. Sanghoee recently asked, trying (unsuccessfully) to trade his Indian accent for a New Jersey one. Like so many other corporate workers, Mr. Sanghoee was a little bored. He left India in 1991 to attend Columbia, where he earned a degree in computer engineering and a masters degree in business administration. Over the next decade, he worked various financial jobs on Wall Street. In 2005, Mr. Sanghoee worked at Ramius, an $11.5 billion Manhattan hedge fund. He commuted from his Upper East Side apartment to a Midtown office, where he invested the

funds money in alternative energy, radio stations and insurance. At night and on weekends, he worked on his book and wrote spec scripts for episodes of Law and Order. None were ever made. Fame and fortune, Mr. Sanghoee said, were things he could not help but think about. He also had a front-row seat as hedge funds looked to Hollywood as a place to park money. Ramius decided in 2006 to start reviewing film financing deals to push into movie investments, tapping Mr. Sanghoee to lead the effort. He flew to Los Angeles to meet with executives at William Morris Agency and Brillstein Entertainment, a management and production company. Mr. Sanghoee landed in a boomtown. More than $12 billion was in the midst of flowing into 150 movies, according to trade estimates. Hedge funds, awash in cash, were eager to write checks. At the restaurant Spago, Im raising some capital became the new, Dont you know who I am? Ramius ultimately decided to take its toe out of the water too risky but Mr. Sanghoee saw an opening. With a novel and, now, a Rolodex full of hedge fund and Hollywood contacts, he would make a movie himself. I had no idea what I was getting myself into, he said recently. In mid-2007, he started calling contacts. (He said he received permission from his bosses to pursue the movie.) One call went to Jai Khanna, a manager at Brillstein Entertainment who had read Merger and responded favorably. Brillstein counts Scary Movie 2 and the television series Just Shoot Me among its producing credits. I saw the story as really commercial, Mr. Khanna said. He connected Mr. Sanghoee with a fledgling screenwriter, Neeraj Chaudhury, and they wrote a script. Merger is the story of an Indian corporate titan who begins a hostile takeover of a satellite company that transmits information from the C.I.A. A New York investment banker working on the deal smells something fishy and turns to a former girlfriend, a brassy newspaper reporter, for help. The corporate titan, it turns out, has pictures of the owner-operator of the satellite company having sex with young boys. As the banker and the reporter race to uncover the plot, dodging assassins in the process, a bigger evil is revealed: The Indian businessman plans to sell C.I.A. secrets to an Arab terrorist.

With a script in hand, Mr. Sanghoee started chatting up hedge funds. A typical pitch occurred in a phone call on Nov. 3 with a principal at a private equity firm based in Connecticut. The firm, the principal said at the start of the call, was looking to invest $7 million in movies over the next six weeks. Mr. Sanghoee began by talking about his book. According to Nielsen BookScan, which tracks about 75 percent of sales, Merger sold about 2,000 copies; Mr. Sanghoee puts the number closer to 20,000, explaining that many copies were sold through uncounted wholesalers. Movies and books sell each other very effectively in todays marketplace, Mr. Sanghoee started out, which is where I think Merger becomes even more sensible a project. We know this book is going to sell the movie. Fantastic, responded the potential investor, Alex, who agreed to let a reporter listen in on the condition that his last name not be used. They chatted for about 40 minutes about how a deal might be structured and about Mr. Sanghoees plans to get a major studio to distribute the film. How would he rope a big studio? I can pick up the phone and get the meetings I want, Mr. Sanghoee assured Alex. Mr. Sanghoee found another sucker, as he jokingly put it, while on a date. One night while out drinking, Mr. Sanghoee and his companion bumped into Peter Delahunt, a municipal bond trader and an acquaintance of Mr. Sanghoees date. Mr. Sanghoee, always the pitchman, talked up Merger and, a few weeks later, gave his new friend an autographed copy of the book. Soon Mr. Delahunt had committed to chip in six figures for development costs. I thought it was worth the gamble partly because the story has so many hooks and angles, Mr. Delahunt said in an interview. He said he had figured that his own Hollywood connections might help push the project along. My son was a classmate of Anne Hathaways brother, he said. Meryl Streeps brother, Dana Streep, was another contact. I used to work with him way back in the old days, Mr. Delahunt said. He doesnt know it yet, but he will be getting a call from me. Big Names, Little Progress Despite the strong interest Mr. Sanghoee also had a Canadian investor offering to put in the entire $15 million, with caveats most investors were reluctant to complete a deal until they

saw a cast list, even a tentative one. Mr. Sanghoee toyed with approaching Mr. Gyllenhaal, but Brillstein vetoed the idea. Everyone thinks that what they wrote is genius, said Mr. Khanna, of Brillstein. Im here to tell Sanjay that certain things he wants are never going to happen. With Mr. Khannas help, Mr. Sanghoee hired two casting directors who had worked on movies like The Good Shepherd and Coyote Ugly. They came up with a list everybody thought was realistic. For the role of the investment banker, they would go after actors like Ryan Phillippe and Matthew Fox, according to a business plan that Brillstein helped develop. Winona Ryder and Claire Danes were possibilities to play the reporter. For the central role of the villain, they would go after Amitabh Bachchan, a Bollywood star who could help Merger cross into international markets, an increasingly important source of revenue for American movies. Navigating Hollywood was proving trickier than Mr. Sanghoee had thought. My lack of sleep and daily dose of hitting against walls is finally beginning to wear me down, he said in January. There is a passive-aggressiveness in the way this business functions. Basically the old adage that no one in Hollywood ever says no is shockingly true. A bit of casting luck perked him up. The actress Lara Flynn Boyle gave a verbal agreement, via her manager, to take a supporting role as a sultry henchwoman. We can use her name when speaking to investors and when talking to agents/managers about their client roster for the other roles, wrote Stephen Vincent, one of the casting directors, in an e-mail message. Mr. Sanghoee had talked Harvey L. Pitt, the former chairman of the Securities and Exchange Commission, into serving as a consultant on the movie. Mr. Pitt said in an interview that he got to know Mr. Sanghoee a few years back, when the writer approached him about tips for one of his scripts. Over all, the story is quite good, Mr. Pitt said. The character of the S.E.C. chairman isnt particularly attractive, but I guess thats poetic license. Hedge funds and private equity investors apparently liked what they saw. Two professional basketball players (whom Mr. Sanghoee declined to identify), a fund behind the 2006 film The

Namesake and the Connecticut fund started serious talks, according to Mr. Sanghoee. Southern Sky, the fund based in Atlanta, agreed to put in $7.5 million. In April, Southern Sky began to get nervous, Mr. Sanghoee said. Panic on Wall Street over the collapse of Bear Stearns had led to unprecedented intervention in the markets by federal regulators. The economy, already running on fumes, was further rocked by escalating oil prices and plummeting consumer confidence. As the bad news whipsawed the stock market, Mr. Sanghoee had another problem. People started asking if this is really the right time to be putting out a movie about Wall Street, he said. Meantime, pictures backed by investors like The Kingdom and The Other Boleyn Girl continued to disappoint at the box office. Maybe Hollywood was not such a smart bet after all. Southern Sky did not pull its money but started pushing Mr. Sanghoee to come up with a less risky plan, like bringing on an experienced director instead of Mr. Sanghoee himself. To try to appease the financier, he suggested a smaller investment of $4.5 million. When the hedge fund handling debt financing liquated most of its assets, Mr. Sanghoee thought of approaching GE Capital Solutions, which handles Hollywood financing deals, but he has not yet done so. I know other people would have given up a long time ago, he said in an interview last week, but Im now experienced enough to know that these setbacks are all just temporary. In fact, Mr. Sanghoee said Grosvenor Park, an entertainment financial services company, on Thursday expressed interest in backing Merger. When Mr. Sanghoee began his pitch in October, he promoted his lucky timing. That month he told one potential investor in a telephone call that 20th Century Fox was working on a sequel to Wall Street, the 1987 film starring Michael Douglas. We are going to be able to ride the publicity wave that movie will generate to get our movie noticed, he said during the call. His new angle? His biggest competitor is out of the way. We think Wall Street 2 is not going to happen, he said in a mid-April interview. That is a golden opportunity for our picture.