What is a completion bond film?
A completion bond is a contract that guarantees monetary compensation if a given project is not finished. It provides protection if the contractor runs out of money or any other budgetary issues come up during the project. Many businesses use completion bonds, including films, video games, and construction projects.
How much does a film completion bond cost?
The bond fee itself is negotiable—typically 3–5% depending on the risks as assessed by the completion guarantor. For these reasons, completion bonds are typically used on mid- to high-budget independent films.
What does a completion bond assure the financiers?
In general, a completion bond guaranty assures banks and financiers that: The producers will complete and deliver the film in keeping with the screenplay, budget and production schedule that the bank or financiers approved; or.
Who is the beneficiary of a completion bond?
Obligee
The Obligee is the beneficiary under a surety bond. If the Principal cannot or will not perform, the Surety steps in and makes good on the Principal’s obligation. The Obligee also has an obligation under the bond.
Is a completion bond insurance?
A Completion Bond is a Film Investor Insurance. Some call it “Completion Guarantee” or “Bond”. In the Entertainment Industry it protects a Film. The Insurance Product acts as a financial guarantee.
What is the purpose of a completion guarantee?
A guaranty granted by a project sponsor or a contractor to ensure a facility or project will achieve final completion. In the case of: The project sponsor, it agrees to provide subordinated financing or equity contributions to the project company if required to complete the construction of the project.
How do completion guarantees work?
In a guaranty of completion, a creditworthy principal or affiliate of the borrower guarantees that construction of the project being financed by the construction lender will be completed, even if (or especially if) the borrower defaults. In essence, the guarantor guarantees completion.
What does a completion guarantor do?
The completion guarantor arranges for a cut-through certificate to be issued from the reinsurer in an amount sufficient to cover the entire principal amount of the production financing, interest, and certain other costs incurred by the financier.
What is fidelity bond coverage?
A fidelity bond is a form of business insurance that offers an employer protection against losses that are caused by its employees’ fraudulent or dishonest actions. This form of insurance can protect against monetary or physical losses.
What is meant by completion guarantee?
A guaranty granted by a project sponsor or a contractor to ensure a facility or project will achieve final completion. In the case of: The contractor, an agreement to complete the project in accordance with agreed specifications. This obligation is usually secured by performance bonds or liquidated damages.
How does a completion guaranty work?
Is a completion guarantee a contingent liability?
A contingent guarantee is a guarantee of payment made by a third party guarantor to the seller or provider of a product or service if the buyer cannot pay. If it is likely to become a confirmed obligation, an accountant should record a contingent liability on a balance sheet.
Why do producers need a completion bond guaranty?
A producer usually secures a completion bond guaranty for the benefit of the bank or other financiers who agree to make the necessary production funding strike price available to the producer. The producers will complete and deliver the film in keeping with the screenplay, budget and production schedule that the bank or financiers approved; or
What do you mean by completion Guaranty in film?
Completion Bond. A motion picture completion guaranty is a written contract that guarantees a motion picture will be finished and delivered on schedule and within budget. The majority of films produced and fully financed by the major Hollywood studios are, in effect, self-guaranteed.
How much do you need for a completion bond?
The completion bond marketplace has consolidated in recent years and the remaining surety companies will not consider a submission under $5,000,000 without an equal amount of collateralization.
What are the rights of a completion guarantor?
Accordingly, the completion guarantor is given certain rights to monitor and oversee the production of the film. The producer will be required to furnish the completion guarantor with cost reports, production reports, cost projections and other customary motion picture measures of progress.