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UK Private Financiers: Adventure Capital

Investor confidence in the UK film industry is growing thanks to the country’s embedded tax credit and the efforts of an increasing number of dynamic private financers. Geoffrey Macnab reports

One sight unlikely to be seen in Cannes this year is that of the UK’s private film financiers throwing lavish parties on huge yachts. The newish breed of the country’s financiers will be at the festival in their usual sizeable numbers but are a sober, serious group these days. 

“The [Cannes] market’s tone has changed,” suggests Motion Picture Capital CEO Leon Clarance. “It is much more business-like than it used to be.” 

Guillaume de Chalendar, global head of media finance for Bank Leumi, agrees. “There is less of the froth we’ve seen in the past, which means Cannes is a better place to do business,” he says.

Even though institutional investors remain comparatively rare, the UK’s ­private film-finance sector is in a far healthier state than in the wake of the 2008 financial crash. 

“When we started Fyzz in 2010, most of the banks, if not all of them, had withdrawn from the financing landscape,” says Robert Jones, co-managing director of producer-financier The Fyzz Facility. “Over the intervening period we have seen a lot come back in, not so much [in the UK] but certainly globally.”

There is no doubt the negative publicity and high-profile legal cases surrounding tax-based partnerships from the UK’s sale-and-leaseback era of the late 1990s and early 2000s impacted on investor confidence. In the UK press in recent months, there have been a string of grim stories about investors (many of them footballers and celebrities) in old film-tax-based partnerships now facing huge tax bills. Eclipse Film Partners 35, promoted by Future Capital Partners, and Ingenious Film Partners have both been the subjects of lengthy legal battles with HM Revenue & Customs, while the Little Wings Films case saw several executives charged with film tax relief fraud last year. Nonetheless, confidence is returning. 

“The smart investors are able to differentiate between a scheme structured to deliver a tax advantage that is incidentally based around film and a genuine investment proposition that makes sense. They understand there is risk,” says Ivan Mactaggart of Trademark Films.

“We have a pretty safe and secure ­situation now where there are no loopholes and there’s no ‘funny money’ around,” says Paul Brett of production and financing outfit Prescience, whose recently launched subsidiary Ignition Media Finance is now established as a leading international pre-production financier. 

Like several other well-established financiers, Prescience has been venturing into television drama as well as film. Its TV credits include the BBC’s Bafta-nominated Wolf Hall and Richard Eyre’s The Dresser.

 Additionally, the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are now established tax-relief vehicles through which private individuals can invest in film. Companies such as Ingenious Media, Motion Picture Capital and Goldfinch Entertainment have raised significant amounts of money through EIS for UK films. 

Significantly, the UK film tax credit is bedded in firmly and financiers are happy to lend against it, and UK producers are now able to access private equity from some heavyweight new players. These include New Sparta Films and Switzerland-based Silver Reel, which has become an important player in UK and international film financing and has backed projects including Gavin Hood’s Eye In The Sky.

Another significant new player is Riverstone Pictures, the outfit set up by Deepak Nayar and Nik Bower in 2014. Backed by Reliance Entertainment and Ingenious Media, Riverstone’s early credits include Genius and Sleepless Night.

And regardless of the tax benefits, there are high-net-worth individuals interested in the sector. “That remains,” confirms Elisa Alvares, head of media finance at Bank Leumi, one of the most active banks in UK film financing. It has provided debt financing for a slate of films produced by Miriam Segal’s Good Films, including The Infiltrator starring Bryan Cranston.

But the high-end television sector and its voracious appetite for above-the-line talent is putting pressure on independent film-makers, and budgets are subsequently rising. As below-the-line costs decrease thanks to digital technology, it is costing more to access top-level actors. “To make a $5m film, you need a $10m cast,” as one financier notes. Ns

Selected UK private financiers

The Fyzz Facility

Set up in 2010 by Wayne Marc Godfrey and Robert Jones, The Fyzz Facility has been involved in more than 100 films. Two of its most recent investments have been in Martin Scorsese’s Silence and Taylor Sheridan’s Wind River. 

The company’s financing is largely debt financing against pre-sales contracts or tax credit lending. “Sometimes we do bridge financing to get the film to the starting gate while the main financing is being closed,” Jones explains. “We’re very much led by the market.”

He is clear about what Fyzz does not do. “We are not EIS- or SEIS-based. There is no tax wraparound in what we do. We have a pool of private investors who we have found and educated in the process and the way we work, and the kind of financing we do,” says Jones.

“We are not an equity financier. Our investors are people who look for a competitive rate of return and are not so interested in the ownership of the film at the other end. Our length of loan is typically 12 months or less. For an investor who is returns-driven and wants to keep their money working and revolving, working with us means they get their money back and can reinvest in the next project.”

New Sparta Films

New Sparta Films is the finance, development and production company set up by UK economist and entrepreneur Jerome Booth and business development specialist Nicki Hattingh in 2013. 

It has backed projects such as Brimstone, Tale Of Tales and Miss You Already, fully financing the latter. Its sister company is Icon Film Distribution, also owned by Booth, although the two companies keep their activities separate. New Sparta Films also has a production division headed by Christopher Simon; Sheryl Crown is head of development.

“We are City people with a passion for film,” says managing director Hattingh. “What I thought we could do really well was work in a very ethical way — a collaborative and fair way.”

Hattingh and Booth are the company’s sole shareholders and the only ones with the power to give the greenlight to projects. “It is very uncomplicated,” says Hattingh. “For me, it was debunking a myth about how complicated films need to be. We only have one source of finance. I can draw down finance as and when I need to. Jerome has agreed a seven-year film plan.” 

They are creative people with a plan to finance three to four projects a year. “We have to love a project,” she says. “Only then will we look at its commercial potential.” 

Motion Picture Capital

Motion Picture Capital, which is wholly owned by Reliance Entertainment, has recently backed Automatik Entertainment’s Come And Find Me, starring Aaron Paul and Annabelle Wallis; Sophie Brooks’ New York-set romantic comedy The Boy Downstairs, starring Zosia Mamet; Xavier Gens’ horror thriller The Crucifixion; Lennart Ruff’s sci-fi adventure The Titan; and Mark Palansky’s Edgar Allan Poe adaptation The Jester.

The company uses EIS and SEIS schemes regularly. “EIS is still a successful vehicle as far as we’re concerned,” says chief executive Leon Clarance. “There is a lot more due diligence done than may have previously been the case. Investors and their advisors are, more generally, better educated and better informed. We spend a lot of time contributing to that process.”

Motion Picture Capital recently launched a development SEIS fund and is currently identifying the first group of projects to develop, with a view to moving into production.

Premiere Picture

Premiere Picture has financed and co-produced more than 80 UK and international feature film and documentary productions. Fiction features tend to be budgeted from $1m to $40m, while documentaries are budgeted from $150,000. Recent investments include Terry Jones’ comedy Absolutely Anything, starring Simon Pegg and Kate Beckinsale, and Ella Lemhagen’s All Roads Lead To Rome, with Sarah Jessica Parker. 

The company recently launched UK distribution company Bulldog Films, which has a library of some 18 titles. It also has an EIS product that has so far put money into five films.

“We have never been busier,” says Jason Garrett, who arranges film completions for Premiere Picture. “We have done one or two studio films but most of it is your solid, vanilla independent film where we ask for real recoupments. Our investors invariably get real returns. We put our clients into as many films as possible to spread the risk.

“We allocate funds to a film and then we will pay when the producers have the rest of the funds, he continues. “Because we don’t pay until they are fully financed, we can get involved very early.”

Ingenious Media

Ingenious was founded in 1998 by chief executive Patrick McKenna, and has financed a range of films, from James Cameron’s Avatar and Ang Lee’s Life Of Pi to Matthew Warchus’s Pride, Mike Leigh’s Mr. Turner, Sarah Gavron’s Suffragette and John Crowley’s Brooklyn. 

It has also produced and financed some 600 hours of television programming, including The Honourable Woman, The Fall and Jonathan Strange & Mr Norrell, all for the BBC.

Such wide-ranging single-project and slate investments give the company a competitive edge, suggests Martin Smith, a special adviser for Ingenious. 

“We have a reputation for being reliable, commercially savvy and exceptionally well networked on both sides of the Atlantic,” he says.

Shelley Media and Greenlight Media are both EIS funds run by Ingenious. Over the past five years Shelley Media has raised nearly $440m (£300m) for film and TV production.

Readers' comments (1)

  • Ingenious use the EIS to cashflow contracts such as a TV broadcast licence. So in return for the EIS tax reliefs that are supposed to benefit higher risk start ups, investors get a virtually guaranteed return of their capital, and even if they get no return from the trade the 30% tax break offers a 42% return over three years tax free. One of the reasons it is so hard for indie producers to raise EIS is that Ingenious soak up all the capacity with these structured projects.

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