Monday, October 26, 2009

Movie Finance - Guaranteed

We had a meeting in the Casa Del Mar the other day, one of the coolest places in town to sit down with friends or business colleagues. We’re developing an innovative new movie investment structure together with a company specialising in asset-backed bonds. It’s an exciting topic, perhaps the holy grail of film finance. If you can remove all elements of risk from the business of investing into movies then investors have a no-lose scenario. By combining a backstop guarantee on capital together with potentially unlimited upside from movie profits, investors can get access to the movies without any of the traditional downsides.

In the movie business a guarantee needs to remove not only the investor’s financial risk but also take out risks associated with producing movies, ranging from the production running out of money or the movie not getting a release, to releasing a stinker of a movie that earns no money and loses all of the investor’s capital. Investors all over the world turn to the movie business for many different reasons but they all have one thing in common: they realise they’re putting their money at significant risk. A properly structured guarantee protects their money and shifts the odds significantly in their favour.

We’ve seen many types of guarantees being offered in the film finance world over the past few years. Typically they’re backed by some sort of collateral like a property portfolio or government bonds. These structures looked alright and were offered up by legitimate banks but the crunch came when some of the offering banks themselves collapsed or the underlying securities proved to be less cast-iron than they had seemed. Our own Movie Portfolio Fund was actually discussing such a bond backed by Lehman Brothers with investor groups but mercifully hadn’t concluded a deal on it before the crash. Now, however, we’re working with an asset class that will provide a fail-safe guarantee to pay back investors’ capital, via an exchange-listed financial instrument, and give them a piece of the profits from a portfolio of mainstream movies.

In this way we’ll be able to do two main things: protect investor capital and channel sufficient funds into movie production to provide significant upside for investors and producers alike. The goal is always movie money, the solution is to give investors what they currently don’t have: absolute security for their money. See you at the Casa . . .

The Out Of Obscurity team.

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