In a region awash with equity, where film-makers and banks eye each other with caution, it is not surprising the Asian film industry does not use debt financing to a great degree.
In general, banks are not familiar with production companies and distributors so do not know how to measure risk, while the film-makers are unwilling to burden themselves with the rigours of accounting and scheduling that banks and completion-bond companies demand.
And as few films are pre-sold or use gap financing, producers do not see the need for the added expense of bonds.
But the number of exceptions is slowly growing. Leading the charge is the Hong Kong-based creative industries team of Standard Chartered Bank which has been lending against pre-sales and/or providing gap financing to Chinese blockbusters such as Curse Of The Golden Flower and Red Cliff, and Hyde Park Entertainment's English-language Streetfighter, which recently filmed in Bangkok.
Standard Chartered was also involved in the financing of the Satoru Iseki-produced thriller Rain Fall which is being billed as the first Japanese film to use a completion bond. Directed by Max Mannix and starring Gary Oldman, the $7.4m film is in post-production and due for release in April 2009.
However, Lee Beasley, who heads the bank's creative industries division, says many other big-budget films have not crossed his desk.
'Many films don't need us because there is so much equity available and they would rather give away their profit share,' explains Beasley. 'But it is changing slowly, as producers are beginning to realise they don't have to give away their equity position when a bank can fill that hole.'
Banks in mainland China have also become involved in project financing. China Merchants Bank provided around half the budget of Feng Xiaogang's war movie Assembly via a $7.3m (RMB50m) line of credit with the copyrights of the movie used as collateral.
To reduce risk, the bank set up a project team to track the loan process and the production of the film. It went on to gross $38m (RMB260m) and it is understood the bank made around 8% interest on the loan.
There have also been moves by Asian governments to get the region's banks involved in film financing. Hong Kong's Film Development Council administers the Film Guarantee Fund, while Singapore's Media Development Authority has also been successful in drawing banks into film financing via its loan guarantee scheme.
In Taiwan, local hits Kung Fu Dunk and Wei Te-sheng's Cape No. 7 both secured
bank loans guaranteed by the Taiwanese government.
The South Korean government has set aside a $10m fund to provide completion bonds to encourage banks and other financiers to become involved in film financing.
Production companies certified by organisations including the Korean Film Council (KOFIC) will be eligible to apply. 'One of the main reasons why completion bond schemes have been so late in coming to Korea is that investor/distributors such as CJ, Showbox, KM Culture, Studio 2.0 and MK Pictures are themselves guarantors of completion,' explains KOFIC's Moon Bong-hwan.
The government expects the scheme to benefit smaller companies which have trouble gathering investors.
In general, banks are not familiar with production companies and distributors so do not know how to measure risk, while the film-makers are unwilling to burden themselves with the rigours of accounting and scheduling that banks and completion-bond companies demand.
And as few films are pre-sold or use gap financing, producers do not see the need for the added expense of bonds.
But the number of exceptions is slowly growing. Leading the charge is the Hong Kong-based creative industries team of Standard Chartered Bank which has been lending against pre-sales and/or providing gap financing to Chinese blockbusters such as Curse Of The Golden Flower and Red Cliff, and Hyde Park Entertainment's English-language Streetfighter, which recently filmed in Bangkok.
Standard Chartered was also involved in the financing of the Satoru Iseki-produced thriller Rain Fall which is being billed as the first Japanese film to use a completion bond. Directed by Max Mannix and starring Gary Oldman, the $7.4m film is in post-production and due for release in April 2009.
However, Lee Beasley, who heads the bank's creative industries division, says many other big-budget films have not crossed his desk.
'Many films don't need us because there is so much equity available and they would rather give away their profit share,' explains Beasley. 'But it is changing slowly, as producers are beginning to realise they don't have to give away their equity position when a bank can fill that hole.'
Banks in mainland China have also become involved in project financing. China Merchants Bank provided around half the budget of Feng Xiaogang's war movie Assembly via a $7.3m (RMB50m) line of credit with the copyrights of the movie used as collateral.
To reduce risk, the bank set up a project team to track the loan process and the production of the film. It went on to gross $38m (RMB260m) and it is understood the bank made around 8% interest on the loan.
There have also been moves by Asian governments to get the region's banks involved in film financing. Hong Kong's Film Development Council administers the Film Guarantee Fund, while Singapore's Media Development Authority has also been successful in drawing banks into film financing via its loan guarantee scheme.
In Taiwan, local hits Kung Fu Dunk and Wei Te-sheng's Cape No. 7 both secured
bank loans guaranteed by the Taiwanese government.
The South Korean government has set aside a $10m fund to provide completion bonds to encourage banks and other financiers to become involved in film financing.
Production companies certified by organisations including the Korean Film Council (KOFIC) will be eligible to apply. 'One of the main reasons why completion bond schemes have been so late in coming to Korea is that investor/distributors such as CJ, Showbox, KM Culture, Studio 2.0 and MK Pictures are themselves guarantors of completion,' explains KOFIC's Moon Bong-hwan.
The government expects the scheme to benefit smaller companies which have trouble gathering investors.
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