A specialty lending arrangement whereby a bank will lend the difference between production finance raised and the minimum expected from sales by a reputable sales agent. Usually does not exceed fifteen percent of the budget of a film.
The relationship between a company’s indebtedness and its equity capital – also referred to as a company’s `debt/equity ratio’. Gearing is sometimes also called `leverage.’
An arrangement under which a participant in a film,usually a major artist, will share in gross,rather than net,receipts.
Grossing – up clause
A clause customarily found in loan documents which provides that, where withholding taxes are imposed on payments by the borrower to the lender, the borrower will pay an additional amount to the lender so that the lender receives what it would have received had there been no such taxes. The additional payment is referred to as a `gross up payment’ and the requirement to pay as a requirement to`gross up’.
In a financing context,any technique to offset the impact of movements in interest rates or currency exchange rates. Typical examples of hedging instruments are swaps, options and forward rate agreements.
A period during which a particular form of exploitation is not allowed. A videogram hold back,for example, means a period following theatrical release which must expire before videograms of the film can be released.
Increased costs clause
Customarily found in loan documents, this clause proves that if there is a change in regulatory requirements after the loan agreement is signed which raises the cost to the bank of making o maintaining loan (or reduces its effective return), the borrower will compensate the lender. See also the MLA requirements.
An agreement between parties which, under separate agreements, each separately contracts with the film production company. The inter-party agreement regulates the relationship between these financier parties.
Internal rate of return or IRR
An investment appraisal technique, also known as discounted cash flow yield, from which the profitability of a project or investment can be assessed. The IRR of an investment is the rate of return at which its anticipated future income and expenditure (cash flows) must be discounted to give a net present value of zero. If that IRR is greater than the anticipated cost of funding the project or investment,the project is likely to be profitable.
When a film has been shot on colour reversal stock a duplicate stage (interpositive) is omitted by making a CRI (colour reversal internegative) from the camera negative. An internegative is made directly from this to produce a duplicate negative from which exhibition print copies of the film are made.
A positive print, made from the original negative of the final version of the film,from which a duplicate negative is made. It is then possible to make many exhibition print copies from the`dupe’ negative without damaging the original negative. Also known as the master positive.
An expression used indiscriminately to refer to access letters and to pledge holder agreements, without differentiating between the two. Whilst the functions of an access letter and a pledgeholder agreement might be fulfiled in a single document, the irrespective functions are distinct.
Lead bank, or lead manager
A bank which acts as lead manager for a potential syndicate of banks in relation to a syndicated loan. Appointed by the borrower,the lead manager, in exchange for a fee, normally settles with the borrower the outline of the basic terms of the loan, promotes the loan to potential participants, provides information relating to the borrower and its business and negotiates on behalf of the participants.
Lead managers try to ensure that they are not obliged to provide the loan if insufficient participants express an interest, that they are not liable for the information provided to participants and that they are not liable for any actor omission when negotiating the loan.
Letter of credit (LC)
A written undertaking to pay the sum of money, on delivery to the person giving the undertaking,of documents in the form specified in the letter of credit. When a distribution agreement is discounted, the lender may insist that the advance payable by the distributor is secured by a letter of credit from a recognised bank. The documents required to trigger payments usually include a certificate from a third party, often the completion guarantor, that delivery has been made to the distributor in accordance with the distribution agreement. Some financiers, such as the legendary Roger Corman, finance their positions in feature films by using LC’s alone. Once an independent producer has convinced a financier to participate, the financier can then provide a LC upon which the producer can borrow. The advantage to the investor is that they can participate in the film’s profits as if they had put up cash. The costs of preparing the LC is usually borne by the producer.
The London Interbank Bid Rate, being the rate at which a bank borrows by bidding for deposits to be placed with lending banks in the London interbank market.
The London Interbank Offered Rate, being the rate at which a bank is able to borrow money on the London interbank market from lending banks. LIBOR varies according to the size of the borrowing and its period.
A partnership constituted by a general partner (with unlimited liability) and limited partners (with limited liability).Under English law, the maximum number of partners permitted is twenty save for partnerships relating to certain professional activities. Limited partnership is a form of association frequently used to enable investors to invest collectively. Normally, the general partner will manage the investment. Please consult a lawyer before you attempt to do this, as it is very easy to fall foul of investment law, which is a criminal matter, and the police will come to your house.
A loan similar to a non-recourse loan but where there is some recourse to the assets of the borrower other than those charged,and sometimes limited recourse to other companies. The latter may take the form of a limited parent company guarantee.
Loan out agreement
An agreement where the services of an individual are made available through a production company, usually owned or controlled by that individual.
London Film and Video Development Agency (LFVDA)
An interesting agency which distributes funds on behalf of the BFI and the National Lottery. They are also assessors for the National Lottery, but despite this, they have been regularly t Lottery for their own projects. Andrea Corbett is the over worked grants advisor, and Gill Henderson took over from Steve McIntyre on June 1st 98. They also publish an invaluable newsletter. Make sure you call them.
114 Whitfield Street
tel 0207 383 7755
fax 0207 383 7745
Loss payee endorsement
Confirmation from a completion guarantor’s reinsurer, given to a film’s financiers,to the effect that they can look directly to the reinsurer to make payments under the reinsurance policy in the event that the completion guarantor has a liability to make payment under the completion guarantee.
Low contrast print
Television has a lower contrast tolerance than cinema projection, therefore low contrast stock overcomes such problems as ambient light in interviewee living rooms which would crush out details in dark areas of a picture.
M & E Track
A mixed music and effects track which is free from dialogue. Used for foreign language versions. See also triple track.
In a banking context, the rate of interest payable to a lender over and above LIBOR or the lender?s base rate -for example, 2% over LIBOR.
The Mechanical-Copyright Protection Society Limited, a collecting society which administers the licensing of mechanical reproductions of musical works and the collection and distribution of revenues derived from such licensing.
The minimum sum a distributor guarantees will be payableto a producer as a result ofthe distributor’s distribution of the film. The guaranteed sum may be payable at the beginning ofthe distribution period, as an advance against the producer’s share of the proceeds of distribution. It may, however, be the aggregate sum which the distributor guarantees will be payable to the producer over the whole of the distribution period. Any shorfall of actual revenues against the guaranteed amount would then be payable at the end of the distribution period.
Requirements imposed by the Bank of England on banks providing loans and other finance in sterling in the United Kingdom to maintain certain minimum liquid asset ratios- hence MLA. The cost of meeting these requirements is generally passed on by a bank to its customer on sterling loans. The amount is usually determined as a percent agerate at the beginning of each interest period according to an established formula which is sometimes contained in the loan document, but the bank will usually reserve the right to change the formula. See also increased costs clause.
The Motion Picture Association of America administers the rating system for feature films in the United States in a manner not unlike that in which the BBFC does in the UK.
The Motion Picture Exporters Association of America,the trade association of the major studios, which represents the interests of the studios as distributors outside the United States.
See talent unions.