Entertainment Investment at times can be viewed as an extremely risky investment, many potential investors recognize the potential upside of a successful project and the downside. Hollywood Bonds has entered into an agreement with a premiere Life policy underwriter to create an investment vehicle that eliminates the risk through securitization of a 10 year bond with Life Insurance policies. Who they are and we will be forthcoming with serious enquires.
THE MOVIE PRODUCTION PACKAGE:
Highly experienced professionals vet the movie(s) in the investment package. The investor then invests twice the amount of the movie package requirement. Half of the funds are provided at closing to the those overseeing the movie production company, while the other half is used to secure life insurance policies and provide the funds to manage the policies to assure the investor return of his investment with a minimum compounded rate of return of 7.93% plus the return from the movie package.
BOND: A bond is created specifically for the investor, with the project agreed upon for financing.
BOND RETURNS:
The Investor receives the following:
1. A payment at the end of Year Ten equal to 118% of the Invested amount
2. An interest payment in years 1 and 2 of 3.25%
3. An interest payment in years 3 thru 10 of 6.5%
4. Agree profit participation in the financed Project (Movie Package)
The effective compounded rate of return on the bond payment and interest payments is 7.93%, and that is increased by the profit participation in the project.
ASSET: The asset that secures the bond is in the form of (A) cash, (B) Senior Life Settlement Insurance Policies, and (C) the debt obligation of the Project in the amount of its financing.
The assets are placed in a Bankrupt Remote Delaware Corporation and Christiana Bank and Trust is appointed the Trustee. A Master trust Agreement is specifically dedicated to each and every bond offer that instructs the Trustee how to manage the account as outlined in the bond offering.
SUMMARY: There are two certain things in life, death and taxes. The financial market distress has made this approach very beneficial, and has allowed the structure of the bond to be exceptionally attractive.
PREMIUMS: There are no premiums. Half of the funds invested in the note is used to purchase the Life Policies, pay premiums, interest, management of the life settlement portfolio, and assure return of full face amount of note at the end of 10 years.
FEES: The legal and business plan assistance fees for the notes and package and sales presentations, etc., will run between $75K and $150K depending on the complexity of the deal. That is a lot lower than the bill would be from a major New York or Chicago law firm (probably around $500K).
STRUCTURE: Assume you want to do a project with 3 films at $10 million cost for each, which would require a raise of $20 million for each, or a total of $60 million. I would suggest that we do three escrow breaks at each $20 million raised, so we would not have to get the entire $60 million in to start.
We could have it set in the ppm as Film #1 gets funded with the first escrow break at $20 mil, the second film financed when we hit the break at the next $20 mil, and the third at $60 mil. This would allow the portfolio to only be added to in fully funded increments of $20 mil each.
INTEREST: As we discussed, it would not make any sense to have the films pay interest as it is designed as a 2-4 year period for the films to pay out. So interest would come only from the Portfolio side. That would lower the interest rate annual to about 4% average (final number to be negotiated with Life Cycle). There is no interest paid by Life Cycle in Years 1 and 2, and then a higher amount combined with a payment of the note in excess of dollars invested averages out to the equivalent of a 4% or negotiated rate.
PAYOUTS TO INVESTORS: Lets assume the films are sufficiently successful to pay back 3 to 1 return on invested dollars at the end of year 3 or 4. They may not then want to hold the note to maturity, so Life Cycle may agree to repurchase the note at a discount (probably in the range of 8% - 10% annual prior to maturity date). Would be investor option to sell to Life Cycle. We may also be willing for the investor to have an option that would require Life Cycle to repurchase the note at an agreed price, depending on time prior to maturity.
If you are interested in information on acquiring entertainment bonds, please fill out the short information request form. request form
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