IFCIC, SGR to operate groundbreaking Euro bank guarantee funds

MADRID — France’s IFCIC and Spain’s Audiovisual SGR have signed off on cash contributions from a new E.U. Media Program scheme, which could well spark a Euros 100 million ($131 million)-plus bank credit windfall for Europe’s film industries.

Financed by the E.U. Media 2007 Program, the Media Production Guarantee Fund sports a total four-year Euros 8 million ($10.5 million) budget, running 2010-13.

In deals inked with Media last week in Paris and Madrid, this $10.5 million will be split 50/50 between Paris’ Institute for Financing Cinema and Cultural Industries (IFCIC) and Madrid’s Audiovisual SGR.

The IFCIC and Audiovisual SGR are two of the only institutions in Europe, along with German regional guarantee banks, which already underwrite bank loans to their national film and TV industries, the 49% state-owned IFCIC from 1983, Audiovisual SGR from 2006.

Hedging banks’ risk, so making it easier for producers across Europe to obtain bank loans, the new Media Fund will see IFCIC and SGR extending their bank loan guarantee mechanisms to theatrical film co-productions between the Media Program’s 27 E.U. member countries — plus Switzerland, Iceland, Croatia, Norway and Lichtenstein.

Operations envisaged include underwriting European banks’ cash-flowing specific productions by discounting secured contracts. Development and distribution will not be underwritten.

IFCIC will underwrite 55% of a commercial banks’ credit line, SGR 50%. Both bodies’ leverage is large, however.

According to IFCIC’s Florence Aviles, IFCIC estimates its Euros 4 million ($5.26 million) Media Program endowment will allow it to guarantee Euros36.4 million ($47.9 million) of risk, generating Euros 66 million in credit facilities if guarantees are used to their maximum.

Credit per borrower is capped at Euros 3.3 million ($4.3 million), Aviles added.

The CNC created an experimental IFCIC guarantee fund for European non-French films, which ran 2005-09. This confirmed IFCIC’s guarantee system could work with foreign production companies, Aviles said.

Lending leverage under the scheme will be more prudent than IFCIC’s French operations, given the new Guarantee Fund’s relatively small capitalization and IFCIC’s less comprehensive knowledge of the European film industry, she added.

IFCIC already underwrites just under two thirds of French indie pics made each year. It is becoming increasingly hard for Spanish movies to secure bank finance unless guaranteed by Audiovisual SGR.

Audiovisual SGR has underwritten $129.9 million in guarantees since 2006, aiding about $394.5 million worth of film productions, said Audiovisual SGR general manager Susana Serrano.

SGR will focus on underwriting co-productions, Serrano said.

“The scheme will strengthen co-productions, which is one way forward for the European film industry. And for smaller companies, which often have difficulties accessing bank financing, this scheme can be key,” Serrano said.

The Media Production Guarantee Fund follows a Media-commissioned report, carried out by Germany’s Peacefulfish consultancy, on the role of banks in the European film industry.

Many financial institutions had stopped actively lending to the film sector.

The report recommended “the expansion of third-party guarantee funds that guarantee film related loans.”

IFCIC’s Media Production Guarantee Funds will kick by the end of March, Aviles said. First guaranteed credit facilities may well be closed for productions by the Cannes Film Festival, Aviles said.

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