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20th Century Fox is set to announce a hedge fund-backed film financing deal worth more than $520m thanks to the box office success of Borat and The Devil Wears Prada.

The agreement, which comes amid increasing hedge fund and private-equity interest in Hollywood, will see Dune Capital Management refinance a slate deal – or agreement to produce several films – it struck with Fox at the end of 2005. An announcement on the new slate could come in the next few days, according to a person familiar with the situation.

Under the refinancing, Dune, formerly controlled by George Soros, the billionaire financier, will invest in at least 15 new films. These will include the fourth instalment in the Bruce Willis Die Hard franchise and Fantastic Four: Rise of the Silver Surfer.

The refinancing was made possible by the commercial success of the films in the first Fox-Dune slate, notably The Devil Wears Prada and Borat.

The Devil Wears Prada, starring Meryl Streep, was the surprise hit of the year while Borat, which opened only two weeks ago, is also expected to generate big returns for Dune and Fox, which are owned by News Corp.

The film is believed to have cost less than $20m to make but is on course to generate more than $100m from the US box office. Box-office returns from international markets and DVD sales could double that figure.

The film’s commercial success triggered a bidding war for the rights to the next film made by Sacha Baron Cohen, Borat’s creator. Universal Studios won the battle, paying more than $40m to make the film about another one of Mr Baron Cohen’s comedy characters, Bruno, an Austrian fashion journalist.

The second Dune-Fox fund was arranged and underwritten by Dresdner Kleinwort, which recently arranged a $300m slate deal with Paramount, a subsidiary of Viacom.

Dresdner, which declined to comment, also arranged and underwrote the May 2006 sale of the Dreamworks film library for Mr Soros and Dune. The library was sold by Viacom, which bought Dreamworks last year.

Sony Pictures Entertainment and Universal Pictures have also struck co-financing deals with hedge funds. Ryan Kavanaugh’s two Gun Hill Road funds have raised over $1bn for the studios.

Not all hedge fund investments in Hollywood have been successful, though. Warner Bros’ recent $530m six-picture deal with Virtual Studios, a hedge fund-backed vehicle, produced Poseidon, the year’s biggest box-office flop. Still, the flood of hedge fund and private equity money into the film industry is not expected to slow.

20th Century Fox declined to comment and Dune could not be reached for comment.

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