LAGUNA NIGUEL, Calif. - While production companies are increasingly tapping Wall Street for funds to help counter the cost of making movies, one consultancy is looking to extend commercial paper and term financing for the first time to independent films. Sylvain Raynes, a founding partner of R&R Consulting, said he's been working for several years on a way to extend financing to the less institutional side of movie production.
"The risk profile is very difficult," Raynes said, speaking on a panel discussion on CDOs of alternative investments at Opal Financial Group's CDO Summit held here last week. R&R, founded by Raynes and Ann Rutledge, developed a model years ago aimed at predicting a movie's future revenue. The firm is still working to tweak the technology for independent films.
Those who aim to securitize the future revenues of a film still under production have the task of determining how successful the film will be.
Traditionally, truly independent filmmakers have relied upon contributions, not lender financing, to fund movie productions. Part of the problem is that, unlike established Hollywood studios, independent filmmakers generally do not have the guarantees or financial backing to protect against such issues as exceeding the budget or losing key actors.
Raynes's plan is to provide funding for the films using a commercial paper portfolio. Once a film is released and its chances for success are greater, the film would be placed into a term securitization.
One model floating around involves buying films upon their release at film festivals, then packaging their future receivables into a managed CDO. CDO pricing would be based on the strength and track record of the manager - presumably a group of film experts with a strong ability to choose which independent films will bring in the most money.
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