The American Film Marketing Association (AFMA) has clinched a major new independent financing initiative, reaching agreement with Export-Import Bank Of The United States (Ex-Im) to furnish US AFMA members (producers and lenders) with film production loan guarantees.
The agreement is revolutionary in that it guarantees the production loan and not the individual distributor contracts that make up the loan collateral, thus protecting lenders and producers against the vagaries of foreign economies and buyers.
The production loan guarantees are specifically designed for independent films (not studio titles), with film budgets from $1m-$15m under consideration, although higher budgets may be considered subject to greater scrutiny given to producer and talent fee deferments.
The model, designed by Ex-Im Bank and Lewis P Horwitz, president of The Lewis Horwitz Organization, vice chairman of AFMA and chairman of its banking committee, calls for bank lending using foreign pre-sales contracts as security. The guaranty can cover up to 90% of the loan amount. The loan must be secured by the assignment of all intellectual property rights related to the film and screenplay in all media. A completion bond is also required.
Gap financing may be used, but is not covered by the guarantee. "Since it takes more than pre-sales to fund an entire movie, lenders will also lend a certain percentage of that gap as well, based upon their estimate of the value of those yet unsold rights," explained Horwitz. "While gap financing will not be guaranteed by this programme, it remains an important part of the funding of independent films today. The ultimate impact will be to provide more and/or larger loans against international contracts to independent film companies thereby moving more money into the economy and resulting in more production and the creation of more jobs."
Ex-Im Bank has set a projected minimum of $100m during the first year of the programme which is scheduled to go into practice in May.
The deal marks the first time that Ex-Im has provided the US independent film sector with the same instruments available to manufacturers and producers of US goods and services for export. The programme is designed to increase the number of films and boost job creation in the sector.
The announcement was made at a press briefing in Los Angeles today (Thursday) by Senator Barbara Boxer of California, Jackie M Clegg, vice chair and COO of Ex-Im Bank, Kathy Morgan, president of Kathy Morgan International and chairman of AFMA, and Horwitz.