Bank bows Asian loans

Standard Chartered hopes to grow as local filmmakers become more accustomed to debt finance.

HONG KONG — Film financing in Asia just got a whole lot more modern. One of the world’s most venerable banks, Standard Chartered, is opening its loan books to moviemaking, traditionally one of the trickiest industries to finance.

“The shingle is now open,” says Tony Souza, one of the bank’s most seasoned executives and its Hong Kong-based client relations chief. He is backing a new media lending division based in Hong Kong, headed by former ad exec Susan Ho.

Bank finance is a rare commodity in Asia, with most pictures using some combination of equity, “angel funding,” pre-sales or barter with the occasional splash of government cash. When Asian filmmakers have sought bank lending for larger-budget pics it has often been provided by specialized lenders in the U.S. or Europe.

Standard Chartered hopes to grow as local filmmakers become more accustomed to debt finance.

“We already work with the likes of News Corp. and Astro,” the Malaysian satcaster that owns Hong Kong-based movie distrib and producer Celestial Pictures, says Souza. “But we have not been able to provide them all the services they might require.”

Although domiciled in Blighty, where it is one of the country’s top 25 companies, Standard Chartered has retail and investment banking networks in Hong Kong, Singapore, India and mainland China, where it holds a rare yuan trading license. This year it also bought Korea First Bank and launched China Bohai Bank.

Earlier this month the bank hosted a series of round table presentations with leading lights of the Asian film and TV industry and the legal community introducing the bank’s roster and highlighting issues.

Ho promises to start simple, providing traditional banking services such as currency and cash flow management, before stepping up to more sophisticated activities such as revolving credits to sales agents and distributors and gap financing.

Souza acknowledges that gapping (lending against future receivables) requires intimate local knowledge, but says: “we have good experience and are a local bank in nearly all of Asia.”

Standard Chartered may like to compare media and entertainment to biotech as major growth areas within Asia, but mistrust from both sides has long dominated relations between Asian banks and local filmmakers. And it may take some time to change perceptions.

In India, foreign lending to the film industry only became legal in 2002, while in Hong Kong only nine films in the past three years have made use of government loan guarantees that protect local bank lenders, and then only for sums not exceeding $335,000 or 35% of a film’s budget.

“The growth of budgets, due to improving production values and bigger stars, will start to move people away from angel finance mode and towards structured finance,” Souza predicts.

The pair acknowledges that their initiative needs to be matched by a more professional approach to legal issues from the industry and accompanied by the continuing development in Asia of related services such as collection agencies and completion bonding.

Two of the biggest U.S.-based completion bond firms are seeking to expand in the region. FilmFinances has outposts in India and Australia, while cineFinance has a bureau in Hong Kong.

Fred Millstein, president of cineFinance says: “The Standard Chartered news is a major development in the growth and maturity of the Asian and Chinese cinema marketplace. The local nature of the bank will provide serious potential for companies and filmmakers, co-productions and distribution. Their entry into the business will make for a stronger, more vibrant financing market and I hope encourage many new productions. The money follows the talent, and Asia has great talent resources and the business discipline is growing.”

Clearly the bank has significant ambitions in the sector.

“We have committed very senior resources to this venture. This cannot be a sideline, it has to be a meaningful business,” says Souza.

If it succeeds, it might take up some of the slack from the Royal Bank of Scotland, which having been the leading European-based film banker, now seems to be halting new lending to the industry.

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