Alchemy invests in companies that provide loans to media and entertainment businesses requiring production cashflow to finance film and television productions.

These loans are generally secured against commissioned programme orders from streamers and broadcasters, tax credits, sales contracts, and other contracted cashflows.

Alchemy targets a net annual return of 3%.

Typical Loan Structure

A typical loan secured by pre-contracted revenue, made by an investee company within Alchemy’s portfolio, may be structured as follows –

The lending company in which Alchemy invests (the “Lender”) provides a loan to fund the production of a newly commissioned programme, typically for a major broadcaster such as ITV.

Under the terms of the commission, the broadcaster agrees to pay a licence fee to the production company upon delivery of the completed programme.

Prior to issuing the loan, thorough due diligence is conducted. This includes assessing the creditworthiness and track record of the production company, as well as other key counterparties. If the assessment is satisfactory, the loan is approved and advanced to fund production.

To mitigate risk, the Lender secures its position by taking a charge over the production’s assets and putting payment directions in place. These arrangements ensure that loan repayments, funded by the licence fee, are paid directly by the broadcaster to the Lender until the loan is fully repaid.

The Lender generates revenue through an upfront arrangement fee and interest charged over the term of the loan. These fees are withheld from the loan advance and are itemised within the production budget.

Alchemy Plus invests in companies that provide loans similar to those offered by Alchemy, while also offering loans secured against the unsold distribution rights of a film or television project. These rights may relate to specific territories or distribution channels that have not yet been pre-sold.

This type of lending is known as gap financing. Loans are advanced based on the projected value of the unsold distribution rights. Once the film or television project is completed, the remaining territories can be sold to distributors, with the proceeds used to repay the loan.

Due to the increased level of risk associated with gap financing, interest rates are generally higher than those charged on standard production loans.

Gap financing will be limited to a maximum of 25% of Alchemy Plus’s total lending activities.

Alchemy Plus targets a net annual return of 4%

Typical Loan Structure – Alchemy Plus

A typical loan made by an investee company within Alchemy Plus’s portfolio may be structured as follows –

The Lender provides a loan secured against tax credit revenue and pre-sold distribution rights. In addition, the Lender may also advance a loan secured against unsold distribution rights, commonly referred to as gap finance, where evidence suggests that the film is likely to achieve a higher value in those territories once completed. As a result, the interest rate charged on gap finance is generally higher than that applied to other loans.

Before the loan is issued, detailed due diligence is undertaken. This includes assessing the creditworthiness and track record of the production company, reviewing the strength of key counterparties, and analysing historical rates achieved for distribution rights in key unsold territories. If the assessment is satisfactory, the loan is approved and advanced to fund production.

To mitigate risk, the Lender secures its position by taking a charge over relevant assets and establishing payment directions with tax credit authorities and distribution partners.

The Lender generates revenue by charging the borrower an upfront arrangement fee and interest over the term of the loan. These fees are withheld from the loan advanced.