Michigan’s largest film production studio will likely default on a bond payment due in two weeks, sticking the state’s pension funds with the $630,000 obligation, according a Jan. 19 story in the Detroit News by Nolan Finley.
Sources close to Raleigh Studios in Pontiac told Finley that the owners have not made their required monthly escrow set-aside payments since October, and won’t have the money to meet their biannual bond obligation when it comes due Feb. 1.
If the studio can’t pay, the pension funds have to make the payment, since the deal made in 2009 made the state employee pension funds the guarantor of the $18 million in bonds sold to help build the $80 million studio.
The state also contributed an additional $15 million in tax incentives. The remainder of the financing was put up by the studio owners.
After Gov. Rick Snyder killed the state’s top-tier incentives, last year, it took almost a year for the restructured grant program that favors Michigan-based studios to pass.
“We do think we can market the studio now that the incentives bill has been signed,” the studio source said. “We would have had movies here right now had the incentives continued.”
But at the moment, there are no deals. The source said the studio was in talks with other movie makers, but interest dried up when the state stopped paying 42 percent of production costs.
Raleigh has made two payments on its $18 million bond issue — in February and August of last year.
If it continues to miss payments, the pension funds could ultimately take control of the studio, though that is still a ways off.
When it opened last March, the studio was immediately filled by Disney’s “Oz,” an anticipated blockbuster that used all of its seven sound stages. Disney got $40 million from the state to make “Oz,” and estimates it spent $105 million in Michigan.
Production work wrapped up last month, and now the stages are idle.
The source said Raleigh is committed to remaining in business, and believes it can get past what is described as a “brief
