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Report from Film Finance Summit, NYC

by Jeff Steele

Essential Element - Peter Jackson

Just got back from New York where I participated in the opening panel of the Film Finance Summit. Heenan Blaikie uber attorney David Steinberg moderated the topic Intro and Overview of a TV & Film Transaction, with banking maven Lucie Guernsey, IP guru Jeff Sanders, and me.

We covered the basics of film finance, including the standard finance model of tax credits, presales, gap, and equity. I was pleased we got to spend time on security interests and essential elements; these are critical components of film finance closings. (See list below of related posts on some of these finance plan elements).

A security interest (otherwise known as a UCC filing) is when a lender puts a lien on your film (just like contractors can on your house). For example, if you borrow a bridge loan before your financing/bond closes, that lender will file a security interest so they have preferential rights to the assets of the film, including seizing property, should the loan not get paid back.

The senior lender, gap lender, tax credit lender, and equity investors will also have security interests, with preferential rights in roughly that same order. This is a critical component to a financier’s arsenal should they need to foreclose on the picture.

We also discussed essential elements. An essential element is usually when an actor, director, or other marquee name (like Peter Jackson on “District 9”) is so essential to the overall film package that buyers of pre-sold territories insist they can cancel the deal if that element does not live up to his or her obligation to the picture. If something should happen during production to an essential element such that they can no longer perform, it can be grounds for abandoning the film (if a suitable replacement can’t be found), causing the bond company to have to pay back all the investors.

In order to be approved as an essential element, that person must qualify for essential element insurance coverage, which is much more extensive and expensive than standard cast insurance (it’s more like a physical for a life insurance policy.) It’s surprising how many talent agents do not understand this process and are aghast that their client has to take a barrage of drug tests, which they don’t always pass.

We also discussed the plight of entertainment banks, now down to five. Unfortunately, another major lender is currently sitting in the cross hairs of possibly being scrapped (more on that in a follow-up post).

I wasn’t able to stay for other panels, so unfortunately I can’t comment on them. I believe the next Film Finance Summit will be in Toronto, where I may participate as well and be able to sit in on the other discussions.

Previous posts, referenced above and of interest to the topics discussed on the panel:

7 Responses leave one →
  1. April 30, 2010

    Which are the 5 banks you consider to be “entertainment banks”? Thanks,
    Paul

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  2. Jeff Steele permalink
    May 1, 2010

    The Los Angeles banks that are actively lending in the single picture space are Comerica, Union Bank, National Bank of California, Pacific Mercantile, Bank Leumi, and City National Bank (ok so technically there’s six, but CNB is (by their own admission) very conservative and a tough nut to crack.)

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    • May 6, 2010

      Thanks; anyone left providing slate financing?

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    • Paul Wolfson permalink
      June 17, 2010

      Are any of these banks, or anyone else, doing slate financing?

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  3. Maurice Joshua permalink
    May 7, 2010

    I just found this site and find it to be, in a word, ausgezeichnet (pardon me for the only bit of German I remember from childhood). But I wanted to say thank you for the resource.

    I am a New York based indie producer, who attended the Film Finance Summit and felt going in that I had enough information on the business of filmmaking to pull many triggers. Boy was I wrong. It seems the more I think I know the more I learn, so thank you and the rest of the panel as well as the speakers of the other panels.

    Even with A-list talent signed (and not just a LOI) it’s still difficult to get funding. I spoke to some of the other attendees at the end of the day and many felt pessimistic about locating funding sources, but a core group of us felt that it just means that we have to make sure we present a polished package for any potential investors. Also, I feel that we were given a roadmap of sorts.

    I mention all of this in a long-winded way of offering my eternal gratitude.

    -Maurice

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  4. Jim Culp permalink
    May 11, 2010

    I’ve been reading your writings for about 4 months and I feel lucky to have found this resource.

    I think I could relate better to your posts if you could give examples of films that are financed in the manner(s) that you discuss.

    Thanks again.

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