Staff Reporter

It's a tale of two film finance groups, but it reads more like a "B" movie script.

That's what Hollywood finance insiders were saying last week after Imperial Bancorp announced it is spinning off its Lewis Horwitz Organization and some other operations into a separate public company with the temporary name of "SpinCo."

Imperial Bank officials portrayed the move as a strategic one designed to enhance shareholder value by giving more autonomy to the Horwitz group, which specializes in financing small-budget films.

But insiders at other film-financing banks said privately that the move also is being equally driven by an intense and sometimes unpleasant rivalry between Horwitz and Imperial's other entertainment finance division, which will not be spun off.

Lewis Horwitz founded his company 16 years ago. In 1989, it was acquired by Imperial to complement the bank's own entertainment finance group, which was relatively inactive at the time.

In the years that followed, Morgan Rector became head of the Imperial Entertainment Group and capitalized on Horwitz's knowledge of film finance to enter the production-finance arena. (Previously, Imperial Entertainment had been primarily limited to providing business banking services to entertainment clients.)

Both the Horwitz group and Imperial Entertainment have emerged in recent years as financing leaders for lower-budget independent films. Imperial Entertainment has more than $200 million in commitments to entertainment organizations, while the Horwitz group's loan portfolio is currently about $100 million.

A rivalry soon developed, according to bankers from the close-knit film finance community.

"It's been widely recognized that the two groups Lewis Horwitz and Imperial's own entertainment division are in direct competition with each other," said Ken Whiting, manager of entertainment banking at Sanwa Bank California. Prior to joining Sanwa, Whiting was a member of the film finance group at First Interstate Bank, which was a major film-finance player before being acquired by Wells Fargo Bank last April.

Another entertainment financier was more direct: "It's a very bad relationship between the two of them. There's a lot of resentment. I think Lew feels Morgan hasn't been around very long, and (Morgan) benefited a lot from his (Lew's) knowledge, especially about foreign distribution companies," said the source.

Imperial officials and Horwitz himself acknowledged there was competition, but they said that relations between the two groups remained mostly cordial.

Horwitz said that a certain competition had developed between himself and Rector, but he denied that the rivalry had anything to do with the decision to spin off his group into a separate entity.

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