Don’t Look East for Film Financing – Hungary Releases Dismal Projections
If you are planning on shooting in Hungary in the near future you were most likely surprised by the recent comments of a senior Hungarian government official. The economy was in “very grave situation.” It sure had an impact on the American markets Friday.
Sad to say but it appears that it’s not just Hungary that has a problem. As posted on SeekingAlpha.com, the biggest Credit Default Swap “spread-wideners-list” Friday includes many of the Eastern European countries. As the table below shows three Eastern European countries have a greater than 20% cumulative probability of default (CPD) as measured by Credit Default Swap prices.
Already at much higher CPD%’s than Hungary are Greece at 46.74%, the Ukraine at 34.65%, Portugal at 26.04%, and Latvia at 24.22%.
As stated by Peter Boone and Simon Johnson in a recent blog post in the NYT “If world financial markets once again decide their risk appetite is low, many unsustainable leveraged institutions and governments are in for a tough ride.” This is especially true for many Eastern European countries.
They go on to say that The EU has made Spain the “Maginot Line” for the Credit Crisis but that it is not likely to hold (again). If correct, this bodes ill for Eastern European countries as they seek their own financing. While Spain is certainly sitting in the crosshairs of default, it may nonetheless have the resources and wherewithal to actually weather this crisis, if they markets will give them enough time to “quickly” turn things around. Ireland and Eastern Europe should keep a crash cart nearby, since they’re going to be rooming with Greece and Portugal in credit ICU.
For the indie filmmaker, this is a blessing if you’re planning to shoot in the Eurozone, but it’s a curse if you need to pre-sell territories to finance your budget. It’s a blessing if your investors are USD; it’s a curse if they’re not. It’s not all bleak: presale transactions are still closings, so that’s good news – this can be evidenced by Comerica’s entertainment division having had their best performing years in 2008 and 2009.
If you really want to play it safe: shoot in the USA. Louisiana is still your best bet, with their 85 cent buyback provision. Pennsylvania is canceling their program. Michigan’s application process is moving at glacier speed (but where else can you buy a house with your per diem?) In a time of so many losses, I would steer clear of transferable tax credit states and stick with rebates. I’m still not convinced that tax credit insurance is worth the price.