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The head of production for Rexford Studios must analyze the terms and value consequences of an international financing involving a German film fund. The financing involves a sale-leaseback structure where international tax rules give rise to a sizable economic pie that is divided up among the fund investors, the studio, and the arrangers. To conduct the negotiation, the producer must value the cash flow streams to each of the parties and recognize the nature of the tax arbitrage in the context of his overall financing needs. As a consequence, the major issues involved in film financing and the nature of sale-leaseback transactions driven by tax considerations are explored, as is the competition between countries for film production. Finally, the underlying determinants of opportunities created by international tax rules are valued. To obtain executable spreadsheets (courseware), please contact our customer service department at [email protected].

This case considers the alternative financing mechanisms for film financing, the evolution of film finance in the United States, and the nature of tax-motivated film financing in the United States and around the world. It develops the strategy driving motion picture finance and the various instruments that advance that strategy. Aggregate trends in those financing patterns are examined with special attention paid to tax-driven financing strategies. It concludes with an evaluation of the international market in fiscal incentives for motion picture finance.