Private Equity for the European Film

Irish media fund offers multi-platform project

(sof 2006-04-10) After the latest changes in UK and German tax law, many investors have realized that some of their investment schemes in media were only interesting from the perspective of short-term tax deductions. Blind pool funds threw reinsured assets to Hollywood (“stupid German money"). It was a model mainly for German banks and the US film industry, and the established associated industries again availed from the first revenues. The dissatisfied European investors now claim that the international film industry rather than the fund set up is responsible for the disappointing financial results.

However, the entertainment and film industry is one of the few industries with above-average growth rates (more than 7% in the years to come, according to latest PricewaterhouseCoopers studies). The success factors for profitable media investments not only include sufficient production funding, but also plausible investment schemes and producer-driven funds. Producers should provide good project development (scripts), excellent directors, stars and sensitive timing. They should be able to exert influence on the powerful international major distributors. Only those producers who can at least take over half the P&A costs of a film and cooperate with established collection agents, can strongly influence the revenue flows.

The initiator team of the Irish firm Stories of Faith Ltd., film and finance experts from the US and Germany, present a business concept going being this scheme. Within the framework of a central world topic, a whole range of products will be produced throughout this "multi platform project": a feature film, large-format films, documentaries, making-ofs, games, books, several DVD and CD editions. These products will also market the other products of the series, create additional production synergies and keep the audience and the customers curious because of the films’ fixed order of release. A franchising system for production and distribution increases efficiency. This structure could even become a model for private equity film financing.

The Private Placement Information Memorandum forecasts an IRR (internal rate of return) of 23.8% and 38%, depending on the share class, before tax until the end of the term in 2013. Bankers have confirmed that this is a conservative estimation. The financial results for the individual investor become even more interesting due to the fact that the production is located under the Western European low tax regime in Ireland, which has both a fixed corporate tax rate at a maximum of 12.5% and incentives for international private investors through double taxation agreements. Even in a worst case scenario, the revenues from the range of products should go beyond the break even.

The closed fund has the legal structure of a private limited company. Shares can be acquired directly or through Limited Partnerships. Project development of the 76 million Euro film industry project will be funded through three million Euro from preferred A shares. The holders of preferred A shares are first in line for recoupment and enjoy twice the common share profits. The risk is minimized through a sophisticated tranche model and the usual insurances for this line of business. Fintage House, the Dutch financial services company, and a Board of Directors with the strongest investors appointed, controls the project.

During our times of an imminent war of cultures, the initiators promote tolerance with stories aimed at a predominantly young international audience. The stories are about people who suddenly find themselves in an unexpected situation and need to change their way of thinking: A politicizing rabbi discovers love, a monk rediscovers life, a girl escapes terror, a millionaire finds the nirvana and a social loser becomes the one giving hope. This is spiritual food, which Katherine Marshall, Development Dialogue on Values and Ethics commissioner from the World Bank, describes as “fascinating”, and which has caused the Vatican to discuss the Stories of Faith project with the initiators in Rome. It remains to be seen whether Stories of Faith can really give food for thought – the first films will come out in 2008/09.

The experts, however, have already honoured the project at the international finance conferences during the Berlin Film Festival. John Olsberg, British producer and distributor, considers the “Stories of Faith" project an exemplary financing model. Private Placement for a European world film project is useful where form and content amalgamate in such a special way.

Wolfram R. Bauer

Stories of Faith Limited
Company No. 401367 Dublin/Ireland
32 Park House, Palmerston Road, Rathmines, Dublin 6
www.stories-of-faith.com
info@stories-of-faith.com

This release was published on openPR.