Private equity continues to look like good bets as foreign subsidies decline Hard to cash in on financial advice
It seems one man’s strategy is another’s cautionary tale as no one could agree on the best financial advice to give indie filmmakers at the AFM Finance Conference on Friday.
Panelists Tom Pollock, prexy of the Montecito Picture Co., Yari Film Group topper Bob Yari, Salter Group’s Roy Salter and Dresdner Kleinwort managing director Laura Fazio offered different theories regarding new sources of equity for financing films.
Not much has changed since last year though, with private equity, including hedge funds, continuing to look like good bets as foreign tax subsidies decline.
In a second finance panel, ICM topper Hal Sadoff, GreeneStreet Films partner Vicki Cherkas, Newbridge Film Capital managing director Diane Stidham and Joseph D. Chianese of Entertainment Partners Los Angeles discussed financing alternatives including state tax incentives designed to lure Hollywood dollars into their local economy.
Although plenty of U.S. productions still head north to Canada, many are traveling east to New York and Connecticut, while Puerto Rico offers a 40% transferable credit.
Panelists couldn’t even agree on the state of the market, which Burke described as “frothy” before being corrected by Fazio, who called it “robust.”
“The liquidity of the market, combined with portfolio theory, drives investors to a level of comfort,” she explained.
Pollock, whose company recently pacted with Merrill Lynch on a $200 million slate financing deal, said Montecito was “happy to co-finance DreamWorks pictures, but only if we produce them. The investment was made at our company because of our track record. That said, we’re not exclusive to DreamWorks at all.”
“You should sell off the international rights but hang on to the domestic rights to maximize your upside,” advised Yari.
To make sound business decisions, you have to play to your company’s strengths, and “our expertise is in taking specialty films, identifying an audience, and targeting that audience with the appropriate marketing campaign,” said Yari. “We strive to create a slate and pick winners as we see the marketplace change.”
As the second panel became increasingly technical, Stidham tried to clarify insider terms, explaining that “the only real difference between mezzanine and supergap financing is that mezzanine crystallizes investors’ expectations and frightens producers. It enables you to start shooting before you have to sell, but with supergap financing, producers are involving bankers simultaneously.”
Cherkas said that location wasn’t the most important factor, adding, “but it is a consideration, because it means that if we get this tax credit or incentive, the production could have more days to shoot, which might make your director happy.”
First panel was moderated by Akin, Gump’s John Burke and second by KPMG principal Penny Mavridis Sales.