Justin Timberlake, Martin Scorsese

Duo looking for financing for pet projects 'Silence,' 'Spinning Gold'

Martin Scorsese is a familiar sight on the Croisette, but this year the helmer will also be shopping his own wares. And Justin Timberlake, whose name alone could probably have fetched a hefty check from a producer at one time, is going to Cannes for the first time for the same reason.

It’s a sure sign of the way movie financing has changed when one of the world’s best-known filmmakers and one mega-celebrity must adjust to how most films now find their funding.

Timberlake will be hawking his pic “Spinning Gold,” in which he will star as 1970s music industry legend Neil Bogart. Scorsese, whose movies are typically released by Hollywood studios but sometimes are independently financed, will be looking for coin for his religious-themed pet project “Silence.” That pic is in the hands of Stuart Ford, founder and CEO of IM Global, who will be introducing the director to potential buyers at the fest.

One of the most muscular sales companies working today, IM Global typically finances around 10 projects a year of varying budgets. The firm relies on backing from its investor India’s Reliance Entertainment and aggressive foreign presales.

The size of the IM Global slate, along with the presence of newer sales and financing companies like the Solution Entertainment Group, Mister Smith Entertainment and Good Universe suggest there’s more money available to make movies, although just how much is hard to quantify.

Ford maintains he hasn’t seen an influx of new cash in the indie financing space. “I’m not sure there are more films being made than there were before,” he added.

Still, there are more banks chasing the movie business than there were 12 months ago, and that can often mean better loans for producers.

“For strong projects, on the margin, you may get a little more now than you were able to two or three years ago,” said David Acosta, senior VP and team leader for entertainment at City National Bank. “Maybe you could get another 5% out of them, or 10%, but you’re never going to plug your equity hole (which can typically range from between 30% to 40% of a film’s budget).”

Moreover, banks must compete with financiers like Prescience and Ingenious, which offer a bigger percentage of coin, but at a slightly higher premium. “They’ll lend 15% to 20% of a film’s budget, and they typically want a 200% coverage ratio,” said Solution topper Myles Nestel.

Any way you look at it, it’s hard to quantify how many new films can be supported by somewhat looser money, especially given that many in the biz are chasing the same brass ring.

“Every year it gets a little harder to get the packages together, because all the foreign sales agents are trying to get the same people,” said Nestel, who has funded projects including “Gravy” and “November Man” via the Solution’s institutional and private equity backers. “The key thing is having access to your own capital source,” he noted, adding, “I think that it will be interesting to see in Cannes how many sales companies actually get talent to commit and attach to material.”

Some observers report an increase in the amount of private individuals and family offices — private businesses that often manage investments for a particular wealthy family — willing to take more risk on junior capital, which can be based on sales estimates and other projections. But while that coin helps financing companies like Exclusive Media back up minimum guarantees, it can cause problems for investors.

“The people putting up the equity don’t want to pay too much for the junior capital,” said Exclusive Media chief operating officer Marc Shipper.

David Shaheen, managing director and head of JP Morgan’s entertainment industries group, said he’s seen an increase in the amount of junior capital in the marketplace, but echoed Shipper’s sentiments. “For the most part, the returns they’re asking for are too high,” he said.

Shaheen noted that banks were willing to take on more risk in the mid-2000s and sometimes put up junior capital. But many lenders backed away from film after the 2008 financial crisis, and deal structures have been forced to change in order to serve the varying expectations of backers. “We’ve gone through a long period where new companies and new innovative deal structures have been hard to come by,” Shaheen said. Still, he added, new pacts have evolved.

Case in point: Lakeshore. In February, the production company closed a $200 million debt facility through JP Morgan that leveraged its marketing investment to gain growth capital.

“That wouldn’t have happened three years ago,” Shaheen said. “It’s a testament to the quality of Lakeshore Entertainment, and it’s a testament that the markets are willing to take on more exposure.”

Still the overall financing picture at Cannes this year figures to include some give and take. Increased competition among lenders may bode well, but decreased competition among distribs doesn’t. Entertainment One acquired Alliance and its U.K. arm Momentum in September, while the Eurozone’s ongoing fiscal woes continue to put a strain on local buyers.

“There’s been a consolidation in the distribution sector, and that hasn’t worked its way out yet,” Shipper said.

In other words, filmmakers helping to push their own projects like Scorsese can’t expect to be able to just kick back and enjoy a fortnight of films.

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