Montreal: Alliance Atlantis Communications is folding its structured financing and brokered production services business, including Alliance Atlantis Equicap, into a new and larger joint venture, Sentinel Hill Alliance Atlantis Equicap.

By teaming up, Sentinel Hill and aac are aiming at a larger share of the structured and gap-financing market in Canada, in competition with Independent Film Financing and fidec in Canada and numerous international players.

A privately held company, Sentinel Hill has 70% of the equity of Sentinel Alliance while aac holds 30%.

Sentinel Hill president and ceo Bradley Sherman says the new joint venture intends to grow Equicap’s gap-financing activities. ‘That may involve making overtures to potential equity partners and other people. I intend to make the Equicap Financial gap-financing business one of the pillars of the Sentinel Alliance joint venture.’

Both companies have been active in production services packages, gap financing and banking credit services for producers. ‘And we’ll be looking actively for other areas to participate in the media business, whether they are equity funds for investors or other types of syndicated funds,’ says Sherman. ‘What we’re looking to do is create a vehicle that is a home for capital which wishes to participate in this industry through various ways such as debt, equity and taxes.’

More streamlining at AAC

‘It’s an opportunity to be a part of a much bigger operation but [also] to free up our management resources,’ says Paul Laberge, aac vp corporate development. Laberge says the goal for the new joint venture is ‘to try to become the market leader. It’ll dwarf all of the other competitors.’

Sherman says Equicap’s Robert Beattie has been managing aac’s gap-financing business ‘and the hope is certainly Robert will continue to run that fund, and from the distribution side and the information [side], we can draw on a very deep well at Alliance.’

Talks between Beattie and the new joint-venture managers are ongoing. Beattie was at afm last week.

Equicap president Jeff Rayman resigns his position March 31.

In the deal, aac becomes a passive player in the financing services sector. Sentinel Hill will manage the joint venture’s assets and day-to-day operations.

In a release, Judson Martin, aac exec vp and cfo, says the joint venture has ‘the potential for a more predictable and growing earnings stream, over the longer term, from a broader and more diverse business base.’

Martin says the new arrangement has limited (and unspecified) capital requirements and ‘virtually no direct operating costs and minimal financial risk.’

Changes in federal income tax legislation in ’99 worked to reduce Equicap’s revenues to $6 million, down from $14.2 million in ’98.

Sentinel Hill has established relationships with Goodman Phillips & Vineberg and Royal Bank.

Sherman manages Sentinel Hill’s Toronto office. Robert Strother is chairman and manages the Vancouver office.