NBCal: new lender for film projects
by: Rachael Turk

Screen Hub
Thursday 16 April, 2009

Independent community bank the National Bank of California (NBCal) is taking its “remote services” to a new level with a lend offering to the Australian film industry.

A much needed source of lending capability in this country, NBCal is offering film and television production loans (including discounting pre-sales, cash flow of domestic and international tax incentives, and gap financing), corporate lines of credit and acquisition financing.

In an industry panel discussion yesterday organised between Australasian law firm DLA Phillips Fox and the NSW Film and Television Office (FTO), NBCal’s Senior Vice President of Entertainment, Sports and Media, Adrian Ward confirmed that NBCal would be interested in lending to a number of Australian projects budgeted between $2m and $50m, up to a lending total of around $75m. He also described this interest as a “long-term view”.

Ward, who has been associated with the production financing of 500-600 independent films including My Big Fat Greek Wedding, Monster, The Illusionist, and The Upside of Anger, told Screen Hub that the Australian industry is comparable to the Canadian industry – an industry in which NBCal has also found success – in that it is a country of modest sized population that has used local production to build a bigger international business servicing international co-productions.

However, unlike the Canadian industry, he says it is unusual to be the only bank active in tax credits and that NBCal “doesn’t want to be the only player”.

“Though also very conservative, Canadian banks have been involved in that process a lot more,” he told Screen Hub. “Working with Canadian tax credits is almost second nature to a lot of those banks. It is a core business for them.”

By means of example, Ward said a 12-14 month loan on $3m on an interest rate of 3.25% and margin of 2-4% (with a floor of at least 7) would result in a facility fee payable on the entire loan of 2-4% (5% on a smaller deal). Where a GAP component is necessary (not relevant to the Offset), the GAP premium would be 7-10%. Bank legals are additional to this.

The first project on which NBCal worked in Australia was the animated kids TV series Wakkaville with producer Leigh O’Brien for the Nine Network, based around the Ettamogah brand. There has also been the feature film Charlie & Boots (2009) with Paul Hogan, Shane Jacobson and producer David Redman; and a film with NZ producer Grant Bradley and Limelight International Media Entertainment. They have just closed the second Ettamogah deal, 3D animation series Li’l Larikkins with Ten.

Despite the fact that Ward has been working with projects in Victoria, FTO Chief Executive Tania Chambers attributes NBCal’s relationship with New South Wales to his relationship with DLA Phillips Fox, cemented through a number of projects.

“Nick Cole [Solicitor, DLA Phillips Fox and a producer, with Antonia Barnard, of Victorian filmmaker Glendyn Ivin’s first feature The Last Ride] has been working hard to cultivate this particular connection,” Chambers told Screen Hub.

Ward, in turn, credits Jodea Bloomfield – formerly Ausfilm's VP of Content Attraction – with the suggestion that NBCal should look at Australia.

“It's a good fit for the Australian industry,” Bloomfield said. “The studio projects tend not to require financing of the credits so it's certainly advantageous to have a user friendly, credible and active lender making these loans to local producers.”

NBCal was still listed as a Top 20 industry performer by ICBA Independent Banker magazine, based on return on average assets and return on average equity, and a Top 20 SBA [Small Business Administration] bank lender. However just how small a business they will administer to remains a question for those struggling to finance loan levels of $1-1.5m.

Loan levels of between $200K and $1.5m is what Chambers describes as a gap in the marketplace and a current flaw in the system.

“[The FTO] has been working hard to find solutions in the area of the Offset in the budget range of up to $1.5m. We’re talking to a number of financiers including but not exclusively NBCal,” she said.

Australian financial institutions identified by the panel as having had some level of experience in financing films include Investec, Fulcrum, Westpac, St George, Bank of Bendigo and Bank of Queensland, as well as Media Funds Management.

However the problem identified with Australian banks – apart from their current aversion to Australian film projects – is that they will typically want a personal guarantee.

Hopefully, the panel agreed, this will change as another round of films go through the new Offset scheme and its safety as a product is proven. Meanwhile, however, there is a way to go in terms of educating the four major Australian banks about the parameters of the Offset.

“The risk profile around film now is radically different from 10BA,” said DLA Phillips Fox Partner Bill Chapman, adding that the onus is on producers to demonstrate to banks the new bankability of new film finance structures.

“That and wear a suit to the meeting!” added Cole.

Though NBCal joked about the idea of a dedicated Sydney office “with staff in flip-flops”, and confirmed to Screen Hub that it is talking to a number of people about the idea, no definite plans have been made as yet.

“It would make sense to have someone here do the deals and due diligence,” he conceded. “I certainly expect we’re going to be getting busier.”

Rachael Turk
Rachael Turk is a Sydney based writer and the former editor of Inside Film Magazine. She has written for The Sydney Morning Herald, British Cinematographer and Online Asia and has three film projects in development.

http://www.rachaelturk.com

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