The global film business is being revolutionised as billions of dollars of bank finance pours into the sector. Anthony Beaudoin, senior vice-president and manager, film finance, Bank of Ireland, gives Richard Brass his assessment.
Until four years ago, the Bank of Ireland had no involvement at all in the film industry, regarding it, like most banks, as a niche business. But in 2003, with the Irish economy roaring and the bank doing well, its managers decided to move into new areas and set up a film group in London.
Within two years it was clear that a presence in Los Angeles was crucial to tap into the increasing flow of deals, and the bank hired Anthony Beaudoin, from seasoned film-financing house Natexis Banques Populaires, to garner a slice of this expanding market.
Like most film financiers at that time, Bank of Ireland focused on financing single pictures. 'The single-picture finance market was still very healthy,' says Beaudoin. 'We were focusing on the deals coming out of the US, on what we call split-rights deals, where you have a domestic studio releasing the film in the US and a solid international sales agent selling the film in international markets.
'Our sweet spot on those deals was probably the $10m-$25m budget range, and things were going well on that side. Plus in the UK we were doing a lot of sale-and-leaseback transactions.'
But the game has now changed and the bank's focus has shifted. 'What we've seen over the past 12-18 months is a massive influx of private-equity and hedge-fund capital,' says Beaudoin. 'We've always tried to focus on the top of the market - the better producers, the better sales agents, the films that get US releases with good talent attached. What's happened is that a lot of those films are now being put into slate facilities because, with all this junior capital out there, studios and the better independent producers have the ability to structure these larger slate deals.
'We're not interested in going downmarket, so as a result we're adapting and following the people we want to work with, and that has led us over the past 12 months much more into the slate world than the single-picture world. We still do single pictures, but our focus now is more on the slate facilities.'
He says recent deals the Bank of Ireland has been involved in include the $205m financing for Groundswell Productions, headed by Michael London, which will fund the production of four or five films a year over the next five years, and the $240m fundraising by Joel Silver's Dark Castle Productions, aimed at making 15 films in the next six years. 'We're looking at a number of others,' Beaudoin says.
'There are pros and cons with slate deals,' he adds. 'The idea is that instead of doing one picture you've got 15 films over five years, let's say, and they're all cross-collateralised, so in theory that reduces your risk. You've got junior capital under you, again in theory to take the brunt of a loss if the facility is structured correctly.
'The problem with them for the most part is that the pricing is a lot thinner than what you get on a picture-by-picture basis. My personal feeling is that it's nice to have a diversified portfolio, where you're balanced between these larger slate facilities of maybe five to seven-year transactions, and the good-quality film loans that are 18 to 24-month facilities. The main problem with the film loans is that they churn very quickly, so you have to constantly replace them.'
Beaudoin is in no doubt about the benefit of slate financing for producers, who suddenly find themselves with more flexibility and room to move. 'It's easier for them now to put together a larger facility because they've got the ability to bring in equity and mezzanine financing. That wasn't the case five or 10 years ago.
'Before that, a producer would have to put in a serious amount of his own equity and spend time raising other funds and creating a borrowing base for a facility, so you were seeing just the top-end studio-level producers trying to put together these large facilities.
'Now if a producer has a start date and has actors committed but with only a window to work, they can green-light much quicker if they have a facility. They have much more flexibility, and it certainly helps them.'