Bankrolling the movie business

Standard Chartered is offering producers the finance to make more movies in the region.
Banking isnÆt usually considered a sexy business. Movies and television, most people would say, are sexy industries.

So you might say Lee Beasley is a lucky banker, as head of media and entertainment client relationships for Standard Chartered, he is basically a banker for the stars, and so therefore, by proxy, heÆs involved in a sexy industry.

Except the nitty gritty isnÆt all that exciting after all û essentially he offers a variant of receivables financing for movies û and yet, itÆs a new and growing industry in Asia. Standard Chartered bills itself as the first bank in the region to have set up a creative industries group based in Hong Kong that helps finance cinemas and broadcasters and offers ôcontent financingö. In simple terms, thatÆs providing the money to help produce a film.

The group covers not just Hong Kong and China, but also Singapore and India.
Hitherto, the main competition was from banks whose offices in Los Angeles, New York and London were handling financing for movies produced in Hong Kong or China. And of course, in India, the competition comes from local financiers.

For now, the bank is largely focused on China. Its debut project was Curse of the Golden Flower, a Hong Kong movie produced by Bill Kong, directed by Zhang Yimou (who is the director of the Beijing Olympics opening and closing ceremonies) and that starred Chow Yun Fat and Gong Li. Last year, it was the MainlandÆs largest grossing film at the box office and, as expected, the bank has been repaid for its financing efforts (Standard Chartered declines to say how much it financed).

It is currently financing the $70 million Battle of Red Cliff. This John Woo directed film is based on the Chinese historical classic Romance of the Three Kingdoms and stars Tony Leung and Takeshi Kaneshiro. Aside from big names and big bucks, it also has another key drawing card; its investors are all from Asia.

Hitherto, if movies werenÆt financed in the West, they often were financed by giving up equity in the film. In other words, taking the chance that if it was a success at the box office, you would have a share of the profits. The benefits of bank financing mean that the producers donÆt have to share that profit, they just have to repay the bank loan and interest. (Of course, they are also on the hook for a flop.) But more importantly, notes Beasley, they donÆt give up creative control. ôYou would be surprised how often thatÆs the more important motivating factor,ö he says.

While content financing is certainly the more interesting part of the business û after all it involves funding the production of a movie with the likes of Tony Leung in it, rather than simply making a widget û itÆs still not unlike financing the production of a thousand little plastic boxes.

Beasley works with investors who pool together and invest in a special purpose vehicle (SPV). Standard Chartered takes out a completion bond on behalf of the SPV, that invariably involves a AA+ rated insurance company. This bond covers the risk, as its name implies, that the movie will be completed on time and within budget. Once the film is done on time and in budget, the distributors (who get their movie) pay off the bank. If itÆs not completed on time and within budget, the insurance pays.

ItÆs a straightforward structure, but one that ensures more films will get done, helping to beef up an industry in Hong Kong that is still best known globally for its Golden Harvest films that featured Bruce Lee in the 1970s.

ôStandard Chartered made a conscious decision about three years ago to see what other industries we could build up out here, and this was one of the results,ö says Beasley, who moved to Hong Kong two years ago from the UK, where he had spent many years financing content, to start up the Creative Industries Group.

If such financing proves successful, it means the local industry will gain more immediate access to funding for big-budget productions which, at the end of the day, means Hong Kong could gain its spot on the global map as a centre for world-class movie productions. Now thatÆs sexy.
¬ Haymarket Media Limited. All rights reserved.
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