The partial withdrawal of Security Pacific from Europe and of Japanese banks from the London loan syndication market has left a gaping hole in European media financing. Who will fill the gap?
While some Continental European and U.S. banks say they are looking to expand their entertainment lending, few British institutions have the wherewithal, battered as they have been by the recession.
Geoff Salmon, business services manager of Barclays Bank in London’s Soho Square, estimates U.S. and Japanese banks collectively used to account for 75% of the London-based loan market, which often has been used to raise coin for film and tv projects. “I’m told the Japanese and U.S. banks are no longer involved in the syndication market. Trying to raise syndication money is very difficult,” he noted.
‘Bad news for banks’
“Most British banks are reeling under the recession,” said Premila Hoon, media finance head of Guinness Mahon, the U.K. merchant bank majority-owned by Japan’s Bank of Yokohama. Hoon pointed to the depressed property market and retail and leasing sectors, downturn in all forms of advertising and the homevid rental slowdown as “bad news for banks.”
“There is a credit crunch. You can’t raise money unless you have AAA credit rating, and if you have AAA credit rating you don’t need [credit],” she said.
Hoon said she hopes to revive plans to partner the BBC in a new theatrical production company, BBC Films. However, as Guinness Mahon is willing to invest only “a modest amount,” she’s angling to bring in fresh partners.
Perhaps the unluckiest of the British film financiers is Quick and Hamon, founded in 1989 by Brian Quick and Martine Hamon, who packaged “The Last Emperor” when they worked for merchant bank Hill Samuel’s media division.
Their role as providers of credit lines for sales agents and distribs has been hampered by misfortune afflicting three major shareholders:
* The Gulf Intl. Bank – which bought a 13.2% stake in Quick and Hamon early last year – is owned by eight Arab governments including Saudi Arabia, Kuwait and Bahrain, and naturally has been preoccupied with domestic matters;
* Security Pacific, like many other U.S. banks, is scaling down its activities in Europe and concentrating on its home market;
* French bank Credit Agricole, which took a pounding in Britain last year because of loans to two companies that collapsed and from real estate ventures.
Security Pacific Euro Finance is curtailing some of its European operations and unloading several businesses, though the media finance unit remains part of the project and asset division.
Japanese banks are reported to be retaining more of their funds to help customers at home and are no longer aggressively cutting lending rates for U.S. film companies or remaining active in the London loan market.
“If the prices I heard were correct, the Japanese banks were pricing loans as loss-leaders,” said Adrian Scrope, consultant to British & Commonwealth Merchant Bank.
BCMB has had its own troubles as its parent British & Commonwealth toppled over last year with debts of some £1 billion ($2 billion). Downfall was blamed primarily on a disastrous venture into computer leasing.
Some banks are cautiously aiming to expand their activities on both sides of the Atlantic. Guinness Mahon often teams with Dutch bank Pierson, Heldring & Pierson, a major player in U.S. and European film lending. And Credit Lyonnais Bank Nederland last month reaffirmed its commitment to the global entertainment industry.
British merchant bank Coutts & Co. is “looking for large volume business,” said the bank’s Rodney Payne, another Hill Samuel alumnus. In the U.S., Coutts is working closely with Los Angeles and New York outposts of British bank National Westminster.
Late last year, Coutts helped finance a management buyout of Goldcrest Film & Television, and it’s part of a syndicate providing credit to sales agent J&M Entertainment. Manufacturers Hanover Trust Co.’s London-based media group is “being cautious, , but we’re certainly not pulling back,” said v.p. Andy O’Brien.