On Film Finance…
Film Fund seeks 100 mln usd from institutions, HNWs to finance low-cost movies
By Joyanta Acharjee
An independent film production company led by the producer of ‘Superman Returns’ and the villain from ‘Minority Report’ is offering investors a 12 pct annual return plus a share of profits from its projects as it bids to raise 100 mln usd.
The Hollywood International Film Fund wants institutions and high net-worth individuals to invest a minimum 25,000 usd into an Isle of Man-domiciled Secured Principal Income fund, which is securitized against an international real estate portfolio. EuroPacific Securities, Inc is acting as lead arranger.
The fund has a five-year duration, after which it will sell its film library and launch an IPO in the US market.
Film producer Gilbert Adler and actor/writer Patrick Kilpatrick, who has appeared in such movies as ‘Under Siege 2′, ‘Last Man Standing’ and ‘Eraser’, plan to produce and underwrite lower-cost, high-quality, star-driven films budgeted around 5-30 mln usd.
Speaking at an investor presentation, Patrick Kilpatrick said: ‘We have movies that are in advanced pre-production. There’s a bunch of things ready to go.’
Adler added: ‘Probably in the first year we would make one movie or two.’
Amongst its development slate, the fund has an animated film, a London gangster script called ‘Releasing Frank’ and Adler is also developing a script based on comic book ‘Living in Infamy’, described by its creator Ben Raab as ‘The Incredibles’ meets ‘Goodfellas’.
Following its recent London launch, the fund will be holding roadshows in the US and Switzerland.
Pacific Continental film fund may benefit from new govt funding initiative
By Joyanta Acharjee
The UK Film Council will invest an extra 1.5 mln per year into UK film festivals over the next three years in an attempt to create a thriving festival scene as well as increase funding into a range of film related business concepts.
Pacific Continental, the corporate finance group and broker turned fund manager, said a recent government initiative to create a thriving UK film festival scene may prove beneficial to its niche Film Opportunities fund.
The 1.1 mln stg fund, which stumps up a secured loan for post-production on films which have been independently vetted for marketability, returned 0.38 pct during April 2007, and has returned 26.23 pct since inception in February 2005.
The UK Film Council has announced plans to invest an extra 1.5 mln per year into UK film festivals over the next three years, in an attempt to create a thriving festival scene in the UK as well as increase funding into digital film, partnership programmes, marketing British film on and offline, and market testing.
This increased investment is welcomed by film industry professionals and is positive for the fund, Pacific Continental said.
Speaking to Thomson Investment Management News, Ben Mulroney at Pacific Continantal’s fund management division, said: “The benefit is an indirect one in that money (from the UK Film Council) won’t directly find its way into the fund, but, if there’s more films being made and more money being invested in films in the UK generally, it simply creates more opportunities for films that may require additional financing of the type we offer… so indirectly it creates more opportunities.”
The fund has invested in films such as a remake of Shakespeare’s Macbeth and independent Australian film Candy, featuring Heath Ledger and Geoffrey Rush.
“Our involvement in any film is purely a debt involvement; we’re providing debt rather than the equity, so from our point of view its very much a numbers issue.
Mulroney said his firms typically lends around 20 pct of a film’s budget for a fixed return of around 20 pct.
“We’re the last financier to commit and we have senior debt status so we’re the first out.”
Investors in Pacific Continental’s film fund are high next worth and sophisticated investors.
“We’re not targeting, nor at this stage are we really looking for institutional or family office type investments,” Mulroney said.
F&C moves ’significantly’ overweight on Indian stocks
Head of emerging equities Jeff Chowdhry sells positions in Malaysia and Korea to fund boosted allocation.
By Joyanta Acharjee
F&C Investments said on Thursday it has moved significantly overweight in India within its global emerging markets portfolios, as earnings continue to be strong and valuations are back to attractive levels.
According to Jeff Chowdhry, head of emerging equities at F&C, India is now one of his team’s favourite bets for the next 12 months.
Currently favoured Indian stocks include Reliance Industries, the largest company in the market and a dominant player in the oil and gas market and HDFC, the country’s largest mortgage lender which provides loans to the country’s rapidly rising middle classes.
Keen to buy more Indian stocks, Chowdhry’s team has sold positions in Malaysia and Korea, countries that are unlikely to outperform under the current global economic environment. The team has also slightly reduced its overweight position in Brazil, its favoured Latin American market.
‘On valuation, the Indian market now sells on a forward price earnings multiple of 12 which is below its 5-year average and below the Global Emerging Market average,’ Chowdhry said.
F&C is currently overweighting India by 3 percent above the benchmark.
Faced with the ‘disappointing’ performance of the market in recent months, Chowdhry remains very positive on the outlook for India.
‘Six months ago we were concerned about valuations but these have come down a lot and the market has corrected by 35 percent since the beginning of the year.
‘Whereas India was one the most expensive large emerging markets a few months ago, today it’s one of the cheapest as well as being one of the most attractive on long-term fundamentals.’
He points out that the sell-side analysts at brokers and investment banks are almost universally bearish on their outlook for India primarily because of rising inflation and interest rates worries.
‘This negativity is being reflected in stock prices and creates opportunities for us. Our view is that oil prices are unlikely to continue rising and we expect to see Indian inflation and interest rates toning down over the next 12 months.’
The Indian stock market has also been under pressure by huge outflows of foreign money since the beginning of the year.
‘Our estimates tells us that some $6 billion of foreign money has left the Indian market this year but we expect those outflows to slowdown considerably over the next few months, relieving some of that pressure.’
Chowdhry concluded: ‘We expect earnings growth of 20 percent over the next 12 months and therefore, even if the market does not rerate, the Indian stock market can rise at least 20% from current levels.’
Farming lures more managers as Dexion prepares $270 million fund raising
By Joyanta Acharjee
Private equity product to launch IPO in Q1 2009 and will invest in land and operate cattle and crop farms.
The rush to capitalise on booming food prices and agricultural commodities continues apace as Dexion Capital prepares to raise $270 million for a private equity fund which will invest in land, and operate cattle and crop farms around the world.
The announcement came after Schroders revealed this week that it plans to launch an agricultural farming product for institutional investors in the second half of this year.
Dexion’s vehicle, Global Farming Ltd – a private company domiciled in Guernsey – aims to own and manage farms which are operating in largely unsubsidised farming countries.
Dexion hopes to raise $70 million from a pre-IPO fund raising which is due to close at the end of July and $200 million from an IPO in the first quarter of next year.
The firm said the pre-IPO is ‘going well’ and has attracted 14 main investors, including Sovereign Wealth Funds, family offices and wealth managers.
Global Farming will be positioned to exploit potential developments such as changes to Australian and Russian GM crop regulations and a continuation of the global soft commodity and agricultural land bull market, Dexion said.
It is aiming for a 12 to 16 percent return per annum over 10 years, with potential for significant upside.
Asset management will be provided by Global Farming Advisers (GFA), while Dexion is responsible for capital raising and marketing.
Peter Hannen of GFA said: ‘We believe this is a value proposition of buying the most inexpensive productive farmland in the world and bringing it into development over time.
He told Thomson Investment Management News: ‘We are aiming to be the low cost producer of all our products and that’s why we’ve chosen this mix around the world – because these countries are the low cost producers in their chosen spheres – and since we don’t know what’s going to happen to the prices, we are going to be efficient low-cost farmers of natural products as much as we can.’
Hannen is the former chairman of mining group Celtic Resources, which was acquired by Russian metals group Severstal last year for around 162 million pounds. Alongside his financial services career, which includes sugar trading and managing family assets, he has forty year’s experience of farming in the UK, Australia and South America.
Robin Bowie, chairman of Dexion Capital, said: ‘When you’re looking for who can do this type of thing, it’s quite a tall order. We at Dexion Capital have looked at lots of different managers in this area but what we’ve found is they tend to be country or continent specific, and in many instances they are financiers trying to get to grips with farming operations.
‘We think that we have a very unusual offering because the team is qualified to execute it and because the strategy is global and diversified, which is what we believe the investors want.’
Global Farming will invest in South America, Australia and Russia.
Of the IPO proceeds, 37 percent will be invested in land to be used for livestock, 52 to 53 percent for crops and 8.5 percent in a land bank, with the balance as working capital.
‘We think that we straddle the developing lands in the northern hemisphere and the unsubsidised farming systems of the southern hemisphere. We’re not going to be in the EU, we’re not going to be in North America,’ Hannen added.
‘I’ve included Russian farmland in my global mix where I think we’re uniquely positioned to be able to execute asset management in Russia, with all the difficulties you can run across there.’
In making his selection, Hannen will avoid areas of subsidised land.
‘I like to look at pure markets and pure price and whenever you have subsidy systems – like in Europe and North America – it’s very difficult to tell what percentage of the land value is being supported by subsidised internal prices.’
Dexion Capital currently runs four London-listed fund of hedge funds, including the 1.5 billion pound Dexion Absolute and 150 million pound Dexion Trading funds.
