Fund will help Spanish producers

ICAA Film Institute, EGEDA create audiovisial SGR

By EMILIANO DE PABLOS, JOHN HOPEWELL

SAN SEBASTIAN -- An often-repeated Madrid scene. Waving a file marked "TV contracts," a Spanish producer marches into a bank. He asks for a bridging loan for his movie; the banker asks if he's got a big house. It's not personal, it's business. Many Spanish banks don't discount TV contracts. So producers put up personal assets to snag credit. And pay through the nose. That, for select companies, may now change.

Spain's ICAA Film Institute has teamed with EGEDA, a producers rights collection society, to create Audiovisial SGR, a mutual guarantee fund. SGR will kick off with E6 million ($7.4 million). Spanish banking practice demands 8% provisions: the SGR aims to underwrite $92.5 million in bank credit over five years. To tap guarantees, companies must pay a SGR membership fee. SGR will guarantee loans for companies in film and TV, production, distribution and exhibition.

"Audiovisual SGR will allow its members to negotiate preferential rates with lenders, allowing greater access at lower cost," says media lawyer Juan Manuel de la Ossa, Audiovisual SGR's development director. "The sectors been demanding a financial entity like SGR for years. The beauty of SGR is that it's created by the sector itself."

One question is: Who will receive the funds? The ICAA ran its own guarantee fund up to the late '90s. Since then, small companies have often had to co-produce with bigger players which underwrite the production's credit facilities. Financially challenged companies may not be in for sudden windfalls.

"The SGR is supervised by the Banco de Espana. It can't throw money around," says De la Ossa.

SGR's creation underscores a withering reality -- Spain's fusty financial sector has traditionally scorned its film industry. The guarantee fund alone won't turn around Spain's film industry: tax breaks are capped at 5%, completion bonds are rare and production is hugely fragmented.

A few films -- such as Fernando Leon's current hit "Princesses" -- break out at the B.O. Most titles implode. So production's ripe for consolidation. Early September buzz was that Vocento's film/TV holding Veralia and top Spanish pic company Lolafilms will create a joint distribution house for domestic and international, targeting TV and Internet. Veralia would hold a majority stake. The company would be headed by Lolafilms CEO Andres Vicente Gomez. Expect more alliances or mergers to follow.