Montreal: Following meetings with Canadian banking, production and distribution interests attending the Toronto International Film Festival, sodec president Pierre Lampron says a new $50-million production financing entity will formally launch within a month and begin operations by the end of October.

sodec is putting up $20 million and already has another $20 million to $30 million in commitments from risk-capital and banking sources for the new ‘for profit only’ entity, tentatively known as SODEC-Financiere.

The Quebec-based, mixed-capital agency – expected to further heat up Canadian jurisdictional competition, especially with Ontario – will invest in certified Quebec cultural projects including film, television and multimedia production in the form of gap-financing, investments in larger, commercial projects, and rights acquisitions. No content restrictions will be attached to investments, says Lampron.

The agency will be the first of its kind in Quebec with a business mandate similar to international gap financiers and assurers such as Screen Partners and Film Finances, he says.

In Toronto, Lampron held private talks with bankers and Canadian producers and distributors.

‘For most of the [agency’s] investors this represents the arrival in the market of a player with an interesting financing scope which intends to develop partnerships of all kinds within the production system,’ he says.

Lampron says the initial capitalization for the new agency won’t be less than $40 million, and more likely will be closer to $50 million.

Shareholders are expected to include ‘at least two risk-capital or banking partners’ representing 30% of the agency’s shares and industry partners representing another 20% of the equity.

‘The problem for the partners isn’t one of cash,’ says Lampron, a former director of the Telefilm Canada Europe office in Paris. ‘It’s a business decision as to whether they will or will not be part of an investment [agency] of this nature,’ he says, adding:

‘At any rate, we could begin tomorrow because I already have a sufficient number of important shareholders to cover the $40 million.’

sodec’s topper says industry response to the initiative is entirely positive.

‘The momentum is excellent,’ he says. ‘And in the current competitive environment the existence of a corporation capable of a massive participation, specifically in the area of gap financing, is a welcome event.

‘We could have started with only $20 million, but we absolutely decided we want to develop partnerships. What we’re [offering] to our shareholders is basically the special, and indeed unique, expertise sodec has [acquired] through the management of its various financing programs, specifically the tax-credit programs (content and service programs managed by the agency), which makes sodec a partner to virtually all film and television production undertaken in Quebec.’

Lampron says the agency’s central position ‘allows us to better evaluate the risk and be a more constant and reliable partner.’

No content restrictions

On eligibility, Lampron says, ‘One line of attack is to do business with Quebec companies involved in content-creation projects of all orders.’

He says the new agency’s investment program will not be determined or limited by any form of Quebec-content regulation.

‘It could be foreign companies interested in a Quebec project, which perhaps happens less often, or Quebec companies interested in the international exploitation of a product regardless of what it is or where it comes from.

‘The program is strictly industrial and the only objectives are financial,’ says Lampron. ‘Ultimately, we want to create wealth around the audiovisual content and entertainment professions.’

One of the new agency’s primary activities will be to provide production gap-financing services, a financing sector where banks are showing increased caution and where shared risk is expected to work to investor advantage.

Lampron’s agenda in Toronto also included talks aimed at building ‘an international network of correspondents in both North America and Europe.’

He is also scheduled to hold consultations on the SODEC-Financiere initiative in Europe this fall, traveling to Berlin, Brussels, Paris and London.

sodec executive Suzanne Laverdiere is currently in talks with the Quebec industry on how to best invest an additional $10 million in selective production funding authorized by the Quebec government in the fiscal ’98 budget.

The new money increases the agency’s film and tv budget to $20 million from $10 million.

Lampron says the objectives for the new funds should be in place sometime before the end of October, with investments ready for ‘the winter shooting schedule.’

‘Our objective is [to develop a program] which is compatible with the programs and modifications adopted by other institutions including Telefilm Canada,’ he says.

‘In their great wisdom, we think Ottawa will not undertake any [policy] measures or changes contrary to the wishes of the professional milieu. We think the objective is to [evolve] compatible policies or at least to avoid finding ourselves in situations where investors with shared interests are obliged to take different paths.’

B’casters take feature role

On the new selective funding, Lampron says, ‘We are specifically preoccupied with the goal of producing more feature films, including a number of films with better financing. The other new aspect happening at the same time, and this is a welcome development in Quebec, is the arrival of conventional broadcasters in the financing of feature films.’

A first in Canada, Quebec broadcasters, specifically TVA Group, have been granted limited access to the refundable domestic production tax credit. The broadcasters are obliged to reinvest half the savings in the form of equity participation in certified Quebec feature films.

While the actual credit ceiling for the broadcasters is limited to productions with cumulative budgets of $20 million (the Quebec tax credit for French-track features is 20.5% of the budget), the network’s new equity role is also expected to impact positively on licence fees for domestic movies.

‘The principle is important, and with these equity investments in features it brings a new partner into the sector, new players who will also be interested in the commercial success and exploitation of films,’ says Lampron. ‘It’s definitely a welcome initiative and we think other broadcasters [other than tva] will also take this step.’

In 1997/98, sodec certified close to $85 million in refundable tax credits representing film and television production estimated at $550 million.

This year, between April 1 to July 15, sodec preauthorized credits worth $21.5 million in film and tv production. An interim financing program attached to the tax credits and guaranteed by sodec allows the producer to borrow up to 90% of the anticipated credit. Last year, close to $40 million in loan guarantees were authorized.

sodec invested just over $4 million in 14 independently produced feature film projects in 1997/98, certifying another $5.8 million in domestic tax credits for the same 14 productions.

Another $885,000 was invested in the form of grants to ‘independent’ small-budget feature projects, including features funded through the agency’s Jeunes Createurs program.

Since April 1, sodec has invested $2.8 million in nine Quebec feature films which received an additional $5.2 million in tax credits, representing a total provincial ‘incentive’ package of over $8.1 million.

Pierre Leblanc is sodec’s director-general of business financing. Stephane Cardin is the agency’s certification director.