Montreal: Behaviour Communications is actively negotiating a new $40-million credit facility with a banking syndicate led by Chase Manhattan Bank. Chase’s share of the refinancing is in the order of $17.5 million. Behaviour president and ceo Bernard Legendre says talks could extend to the end of April, but ‘we hope to complete it in the next few weeks.’

At its March 22 agm in Montreal, the company said its restructuring period is over, following a round of about 50 layoffs (primarily in new media and distribution), strongly indicating a turnaround will be directly tied to the delivery of higher-scale feature film production sourced through the Behaviour Worldwide pipeline.

Behaviour also announced it has shelved its stock consolidation proposal.

Matthew Carson, Behaviour’s vp and cfo, says the $40-million refinancing will be used to pay $14 million in loans and scheduled acquisition payments, specifically ‘the merger with MDP Worldwide.’ The $14 million includes a term credit loan of $4.2 million, another u.s. bank-credit debt of $7.5 million, in addition to $2.25 million, the next scheduled payment against the mdp acquisition. The balance would be used for working capital, upcoming acquisitions and general operations.

Behaviour reported 19% of the $83.8 million in top-line ’98 revenues was sourced from the u.s. bhv.b stock was trading on the me at $0.57 at Playback press time, up from a recent low of $0.40. As of Feb. 11, two companies controlled by chairman Richard Szalwinski, BHVR Communications and Esoteric Investments bv, held about 74% of Behaviour’s voting rights, including 76% of the multiple-voting shares and 72% of subordinate voting shares.

Executive compensation

Ten Behaviour executives received cash remuneration totaling $2,093,713 in fiscal ’98.

Szalwinski received $198,462 in salary. Legendre received $375,000 in salary and bonuses, senior distribution vp Pierre Brousseau received $325,000. Behaviour Worldwide chairman Mark Damon received $447,993 and bw president Richard Kiratsoulis received $251,993. Little or none of the stock options granted to company executives were exercised in the period.

At the agm, Behaviour provided a list of bw film acquisitions reported to have total budgets of $245 million. Legendre says the films are slated for delivery in 2000 and 2001 and include Things Behind the Sun, Black Dahlia, budgeted at $80 million; The Body, pegged at $40 million; Countdown to Apocalypse (Aces High), budgeted at $40 million; The Extremist, at $30 million; Red Lips, White Lies, also at $40 million; and, Love and Other Outdoor Sports.

Montreal-based Lux Films’ new slate includes John L’Ecuyer’s Saint-Jude, Claire’s Hat, Le Nouveau Pauvre, a Daniel Lemire comedy movie, and a French-track tv series, La Vie, La Vie.

Legendre offered a two-pronged message in terms of distribution.

He said Behaviour is engaged in becoming ‘a principal distributor,’ then added staff had been cut in half to ‘less than 30 employees.’

In fiscal ’98, revenue from Behaviour Distribution decreased by $7.6 million to $22.8 million from $30.4 million in ’97. Foreign sales revenues were actually up $900,000 over ’97, while all other sectors, specifically home video, dropped.

Based on the re-evaluation, Behaviour wrote down its distribution assets by $2.9 million.

Asked about Behaviour Distribution’s output deals with Sony Pictures Classics and Trimark, Legendre says the deal is ongoing, on a film-by-film basis, and that the agreements ‘were always under review.’

‘We are not going to pay more than they’re worth,’ he says. ‘We have good relations with Sony, and Andy Myers [former senior distribution manager in Toronto] does, too.’

Myers, who is suing Behaviour for unlawful dismissal, is unlikely to remain outside the industry for long and there has been speculation he may be working on a deal to deliver Sony to a new Canadian distributor.

Key is BW pipeline

At the agm, Behaviour ‘flashed’ a product list of films in its ’99 distribution pipeline, either partially released or yet to be released. The films included Three Seasons, Tango, Dreamlife of Angels, The Man with Rain in his Shoes, Run Lola Run, This Is My Father, The Minus Man, Eye of the Beholder, 24 Hour Woman, Lulu on the Bridge, Earth, Grizzly Falls, Bedrooms & Hallways, The Curve, The Wives of Bath, The Highway Man and Free Money. Table for One and Dog of Flanders are also pegged ’98 releases.

The report says ‘as of Sept. 30, ’98 [Behaviour] is committed to buy distribution rights totalling approximately $6.3 million.’

The report goes on to say Behaviour was either exec producer, producer or coproducer on the following ’98 productions: The Blackout, Captured, Deceiver (aka Liar), Free Money, Jungle Book 2: Mowgli and Baloo, The Landlady, Loved Night Caller, Monument Avenue, Orgazmo, This Is My Father and the tv series Highlander vi. ‘Subsequent to year end, the Corporation [Behaviour] has completed the production of Eye of the Beholder and Table for One.’

The report says Behaviour has compiled a library of over 50 feature-length films and distributed ‘on an agency basis’ the following titles in the past year: 9 1/2 Weeks 2, Addiction, The Ebenezer, Killing Grounds, Knock Off, Lewis & Clark & George, Little Men, One Tough Cop, Playing God, Rhapsody In Bloom, Shattered Image, Telling Lies In America and Traveller. Grizzly Falls and Dog of Flanders are also identified as current releases.

Behaviour Interactive (the former video/computer game unit Megatoon Studios) has been successful with Jersey Devil, released last summer by Sony Computer Entertainment. The unit showed an unspecified profit in fiscal ’98. Projects in development and slated for delivery in ’99 include the 3D action shooting games Relayers and Lost in Time, the latter produced for Infogrammes and starring Looney Tunes characters including Bugs Bunny. Lost in Time is sponsored by Warner Bros.

Dealing with Damon

At the agm, the company said it was shelving its eight-for-one stock consolidation proposal. Per Legendre, Behaviour backed off due to ‘reaction of the market.’

The cost of acquiring Mark Damon’s MDP Worldwide, $27.6 million, consists of $13.6 million in promissory notes, $5.3 million in class b shares and the balance in cash. In cash terms, Damon received us$5.9 million, according to Carson. Two past-due payments of us$1 million were converted into just over 4.7 million class b shares. A third payment of us$1.5 million is due April 9.

Legendre says bw has been generating profits of $4 million a year for several years, has 50 films in its current catalogue, and provided Behaviour with us$1 million in profits in fiscal ’98. At the agm, both Damon and Carson were elected to Behaviour’s board.

Legendre says ‘the restructuring period is over,’ and the losses, about $65 million in the past two years, were due to ‘bad acquisitions’ and ‘poorly financed productions.’

Filmline International is no longer a Behaviour subsidiary (See story page 22). Revenue from Filmline deliveries in ’98 (including Free Money, This is My Father and Monument Avenue) made up an important share of Behaviour’s top-line revenues.

BW deal with Threshold

A recent u.s. trade report says l.a.-based Threshold Entertainment and Behaviour Worldwide have signed a pact to produce eight movies based on popular video games. The development was not reported by Behaviour in Montreal, nor as a forward-looking development at the agm.

The potentially boffo movie package includes Duke Nukem, Conan, Zork and Bogeys. Threshold, headed by Larry Kasanoff, is slated to produce, with bw organizing the financing and worldwide distribution. The deal is an equal partnership, with both parties sharing revenue and distribution. Production budgets will be upscale, in the us$20-million to us$50-million range. Kasanoff is currently producing a feature for Dimension Films.

Behaviour’s future is tied to the outcome of its refinancing efforts, but the video game/movie pact slate could be a major shot in the arm for digital visual f/x production at Behaviour Studios.