1 Film Asset Securitization
1 Background of film Asset Securitization
Up to now, China's film industry has accumulated a considerable number of film copyrights that have commercial potential and can generate stable cash flow. Film copyright is not only an exclusive weapon that can effectively enhance the market competitiveness of enterprises, but also used as a financial asset in financing because of its important role in Pan entertainment and the layout of the whole industry chain. Film asset securitization refers to the process of issuing asset-backed securities on the basis of film copyright or copyright usufruct as the underlying asset, the future cash flow generated by the underlying asset as the repayment support, and the credit enhancement through structural design. From the perspective of the film industry, the film industry has a large number of financing needs. As the film asset securitization allows the film copyright owners to retain the ownership of the securitization assets and only use the right of return as a support for financing, the asset securitization financing method is very attractive for enterprises with a large number of copyrights or stable future cash flow but in urgent need of funds for scale expansion. From the perspective of investors, the film industry has a high degree of marketization. In particular, due to the popularity of computer ticket selling system, the film ticket, as the product corresponding to the film, has a high degree of standardization and informatization. Therefore, many investment institutions in the field of cultural industry focus on the film industry and choose investment methods.
Compared with traditional investment methods, film asset securitization has the following characteristics: first, it is supported by asset credit. Film asset securitization is different from the financing behavior of enterprises issuing stocks and bonds with the help of general corporate credit. Instead, it takes the securitized assets and the cash flow generated as the source of securities income. Credit rating agencies also evaluate the credit rating of securities mainly based on the quality of securitized assets and the design of transaction structure. The feature of film asset securitization enables enterprises with general credit rating to break through the limitations of their own main credit, select high-quality assets, and issue securities with high credit rating, so as to effectively reduce financing costs; Second, the securitization of film assets has the characteristics of structural financing. The so-called structural financing refers to the structural reorganization of the risk and income elements in the underlying assets of securities by the sponsors, and the decomposition and allocation according to the credit rating, interest rate, repayment method, term and other conditions, which can meet the needs of investors with different income requirements and risk preferences, so as to improve the overall utility level. To sum up, the characteristics of film enterprises and the advantages of securitization make this new financing tool very suitable for the financing needs of film enterprises with intangible assets as the main asset type.
2 Architecture design of film Asset Securitization
The securitization of film assets includes a series of problems of framework construction: first, package the securitization assets and build an asset pool. How to build the asset pool of film asset securitization is the most critical step of securitization, which determines the success or failure of securitization; Secondly, set up ad hoc carriers and transfer the basic assets from the sponsors to ad hoc carriers. Ad hoc carrier is the core subject of the structural reorganization of asset securitization. It becomes the real issuer of securities through "real sales". It can adopt trust system, company system and other organizational forms; Thirdly, build the transaction structure and increase the credit rating on the basis of credit rating. The design and improvement of the transaction structure can reduce the risk of securitization. The securities after risk dispersion and reconstruction are more attractive to investors. The internal rating results determine the credit enhancement range required in the next stage. In addition, arrange the issuance and sale of securities. Securities can be in the form of bonds with regular repayment of principal and interest, or owner's equity certificates. In the case of structured stratification, they can also include the above two forms at the same time, which is conducive to meeting the different preferences of different investors for risk and return. At this stage, the process of securitization has not ended. Finally, there is the management after the issuance of securities. The service institution implements asset management, and the cash income generated from the asset pool is prepared to be used to pay income to investors through the special collection account of the custodian institution.
In the whole process, three basic systems of asset securitization are the key: asset restructuring, risk isolation and credit enhancement. "Asset restructuring" uses certain ways and means to reallocate and combine assets; "Risk isolation" isolates the underlying assets from the sponsors to achieve bankruptcy isolation and asset-based credit financing; "Credit enhancement" reduces the financing cost through internal guarantee and external guarantee measures, and finally promotes the issuance of securities. The three systems are not only the steps to construct the securitization transaction structure, but also an important means to reduce the securitization risk. However, due to the difference between the basic assets of film asset securitization and the traditional securitization assets, it leads to its special basic asset risk, as well as the complexity of the right transfer and the improvement of the risk degree.
2 Risk of basic assets and risk prevention
The quality of underlying assets is the focus of attention in securitization, and it is also an important basis for the agreement and arrangement of the trading parties and the pricing of securities. Different from the risk of "early repayment" of the basic assets in the traditional asset securitization, the film asset securitization faces the risk brought by the high pending performance of the basic assets, the risk of right defects and moral hazard.
1 Risks arising from high pending performance
The basic assets of traditional asset securitization are often enterprise accounts receivable and mortgage loans. The promoters or service institutions can perform their contractual obligations only by waiting passively. However, in film asset securitization, the source of payment for securities income is usually the future income of the film box office or authorization contract. Therefore, the underlying assets have a high degree of pending performance, resulting in risks, which are mainly reflected in the following aspects: 1 The production quality and distribution of the uncompleted films depend on the filmmakers, so the review risk and completion risk are high, and the box office and derivative product income of the films are highly uncertain; 2. the future box office revenue of the cinema depends on the operation of the sponsors. In addition, it will also be affected by the development trend of the film industry and technological changes; 3. the licensing contract of the completed film may be unable to be performed due to the deterioration of the Licensee's operating conditions, or the licensee refuses to pay the licensing fee due to the Licensor's failure to perform its substantive obligations under the contract as agreed. In either case, the expected cash flow of the securities will be reduced or lost, and the proceeds will not be paid to the investors.
In order to prevent the above risks, we must take corresponding risk prevention measures in combination with the relevant theories of the contract to be performed. For example, in terms of information disclosure, the initiators must disclose to the investors the obligations to be performed, the plans and means for performance, and the resource allocation for performance; In the design of transaction structure, the risk caused by high pending performance can be reduced by transferring residual claims and introducing insurance guarantee institutions.
2 Risk of right defect
The so-called right defect refers to the existence of the rights of a third party on the subject matter when one party of the ownership of the subject matter transfers the rights to the other party in economic activities. The object of film securitization cannot manifest its ownership and related income right through existence like tangible assets. The particularity of copyright definition will inevitably lead to the legal risk of right defects in the process of securitization.
The problem of right defect is first manifested in the state of ownership, such as the ownership of the subject matter wholly or partially belongs to a third party. Unclear rights will affect the legal basis of the right of return, reduce the cash flow obtained from the third party, thus causing damage to the securities investors, and make the ad hoc carrier bear the responsibility of fraud or false information disclosure. Beijing Haidian District Court once ruled not to file a case in a lawsuit concerning the subject qualification of the right to information network communication because it failed to clarify which party in the joint production was the subject of the right to information network communication. Secondly, the scope of film copyright disputes. The divisibility of film copyright may lead to the existence of multiple security interests in the same copyright, or different right subjects have rights to the same object. On the one hand, it enlarges the profitability of the film copyright owners, but on the other hand, it may cause disputes among the obligees over the scope of rights, and then affect the smooth progress of securitization transactions. Thirdly, whether the ownership of the subject matter is restricted, such as whether the film works are original works or deductive works. Deductive works are "secondary works" based on the works of others, and their rights will be bound by the copyright owners of the original works. Finally, the subject matter infringes the intellectual property rights of others. Whether it is script plagiarism or mirror plagiarism, the film project may be involved in a lawsuit, affect the release of the film or be resisted by the audience, and ultimately affect the value of the securitization assets.
In other asset securitization transactions, the risk of right defects can generally be solved through due diligence, but due diligence is not fully applicable to film asset securitization. For film copyright, the ownership status of rights is usually complex, and the judgment of infringement or invalid cases is highly professional. There are also fuzzy areas, so it is difficult to identify defects through due diligence. For this risk, it is necessary to establish a clear and efficient registration system. With the support of information technology, the registration system has a positive impact on transactions. In addition, the transferee can decide whether to require a risk premium on the price based on its understanding of the industry and reasonable business risks, and require the initiator to perform the liability for warranty against defects of rights. During the securitization period, once the assets are sued for the existence of a third-party right, the initiator has the responsibility to repurchase or replace them.
3 Moral hazard
Moral hazard is generally used to describe the self-interest motivation of "economic man" observed by economists in the market economy, such as "free riding" and concealing some facts in transactions. Because of this behavior, the market mechanism can not give full play to the function of resource allocation, resulting in the decline of overall economic efficiency and utility level.
1. forms and causes of moral hazard in film Asset Securitization
(1) Conduct detrimental to reputation
Using the securitization trading system, the initiators can transfer the static rights that have not yet been realized into dynamic cash by transferring the film copyright or income right assets. However, even if the initiators have been separated from the securitization assets, the initiators' behavior may still affect the value of the securities. For example, if the film crew members are boycotted due to their personal words and deeds, political tendencies or style of work, or the producer encounters a serious public relations crisis, the cash flow generated by securitization may be reduced due to reputation damage; On the contrary, the management of the producer and crew members for their own reputation can have adverse effects.
(2) Adverse selection
In the securitization of film assets, the promoters may use information asymmetry to make adverse selection, leaving the more potential films in their hands and securitizing the inferior films. For example, in the platter project of relativity media and Sony, Sony excluded Spider Man 3 from the list.
(3) Competitive behavior
Competitive behavior refers to the moral hazard caused by the divisible disposition of copyright. Cinema release, television broadcast and new media release. The release time of these film products will vary according to the release sequence of different films. The theoretical basis for establishing such a time series is the time window theory. The time window theory emphasizes whether the time length between windows and the price of corresponding products can cooperate together to avoid the substitution effect, and the ultimate goal is to create maximum profits. However, when different property rights are transferred, authorized or pledged separately, the goal of each obligee is to maximize the value of window products owned by itself, regardless of whether it will cause substitution effect and damage the interests of other obligees, which constitutes indirect competition, and the future income originally expected by securities investors may be reduced.
(4) Data falsification
Film asset securitization generally analyzes its future profits based on the historical performance of the underlying assets in cash flow assessment, in order to better issue
Financing, reducing financing costs or obtaining better ratings, some promoters artificially create the illusion of a sharp increase in recent earnings. In particular, copyright has long faced the problem of difficult to accurately value and price. In practice, it often becomes a tool for related companies to transfer prices. This feature exacerbates the moral hazard of Securitization.
In response to this phenomenon, the CSRC has proposed in the provisions on the administration of asset securitization business of securities companies and fund management companies' subsidiaries that "the transaction basis should be true, the transaction consideration should be fair, and the cash flow should be continuously stable", that is, it has put forward requirements for the authenticity of the underlying assets, limiting the construction of the underlying assets that manufacture transactions and accounts receivable for financing, such as the financial subsidies obtained by enterprises under abnormal operations, Enterprise receivables without real transaction background support. The due diligence on the underlying assets includes the legal ownership of the underlying assets, the legality of the transfer, the specifiability of the underlying assets, the operation or cash flow history of the underlying assets, and shall reasonably predict and analyze the future cash flow of the underlying assets.
2. prevention of moral hazard
The leverage effect, risk consequence and impact of the securitization mechanism may be amplified, causing losses to market investors and social economy. Information disclosure of basic assets is an important basis for investors to identify risks and make investment decisions. It is conducive to the formation of fair prices in the securities market, to prevent securities fraud, and to protect the rights and interests of investors. Promoters, service institutions and trustee institutions shall attach great importance to information disclosure and ensure that the information disclosed is true, accurate and complete without any false records, misleading statements or major omissions. In addition, information disclosure is also inseparable from external supervision and management. At present, the asset-backed securities information disclosure rules formulated and issued by the people's Bank of China are mainly aimed at credit asset securitization, while there are no clear provisions on enterprise asset securitization. Qiuchengmei et al. (2013) believe that due to the real sales problems and the existence of ad hoc carriers, there are multiple principal-agent relationships in the asset securitization structure, which can indeed realize risk isolation on the one hand, But on the other hand, it leads to more serious problem of information asymmetry. Songhongbo (2011) believed that, out of the original intention of protecting investors, "the information disclosure of the organization and operating status of the ad hoc carrier can be generally standardized by comparing with the requirements for listed companies". However, this will lose the advantage of securitization as a financing method and increase its cost, because the listing or issuance of bonds of enterprises is based on the overall credit of the enterprise, while asset securitization belongs to asset-backed securities, and the income comes from the securitized assets and their cash flows. Therefore, the content of disclosure should focus on the content of the assets themselves, such as the composition, operating conditions, development prospects, etc, However, it does not require the disclosure of the credit status of the sponsors. If the information disclosure standard in the securities law is copied to asset securitization and requires comprehensive and excessive information disclosure, it will go against the original intention of asset securitization and may stifle the vitality of the market, and ultimately make all participants unable to seek the maximization of their own effectiveness through the market mechanism. Excessive compliance cost means the increase of financing cost and the decrease of investor surplus, which eventually leads to the decline of capital market competitiveness. Therefore, we should strike a balance between protecting investors and promoting financing efficiency.
3 Risk and risk prevention in the process of right transfer
Film asset securitization follows the general mode of securitization transaction. However, due to the imperfection of China's existing intellectual property system in the field of financing and the applicability of the securitization system to intangible assets, film asset securitization has special risks in the link of right transfer compared with the traditional securitization transaction. How to ensure the effectiveness and enforceability of right transfer naturally poses a challenge to all parties involved in the transaction. Generally speaking, there may be two risks in the right transfer environment: transaction structure risk and legal risk. Sorting out and analyzing risks will help protect investors and ensure the security and stability of the financial system.
1 Transaction structure risk
From the perspective of the film asset securitization transaction process, the transaction structure risk mainly comes from the risk caused by the bankruptcy of the sponsor and the imperfect bankruptcy isolation mechanism, the bankruptcy isolation risk of the license agreement and the bankruptcy risk of the ad hoc carrier. Corresponding countermeasures must be formulated in advance for this possible risk to minimize the loss of investors and the impact on the market.
1. bankruptcy risk of the sponsor
The transfer of the securitized assets from the sponsor to the special carrier is the most important part of the securitization transaction. Asset transfer and the identification of bankruptcy property are directly affected by the current creditor's rights transfer system and bankruptcy system. If the establishment of a special carrier or the risk isolation mechanism fails, it is possible that when the sponsor faces bankruptcy or reorganization, the underlying assets to be securitized will be included in the sponsor's bankruptcy property, resulting in the failure of securitization.
(1) Guarantee and prepayment
In practice, security mechanisms, such as third-party guarantee or excess mortgage, are usually used to create security interests on the underlying assets. In the case of the bankruptcy of the sponsor, the ad hoc carrier can obtain the first priority claim on the securitized assets and realize the collateral as the pledgee. In addition, an asset replacement agreement can be set in the contract. When the cash flow of some assets in the asset pool is poor, the initiator is obliged to replace them with assets with high profitability to ensure the stability of cash flow; When the promoters fail to fulfill this agreement or after the promoters replace the assets, the overall situation of the asset pool is still unsatisfactory. When it falls to a predetermined level, the "triggeredeearlyamortization" agreed in advance will be triggered. In this way, investors can withdraw completely before the financial situation of the promoters really deteriorates to avoid causing major losses.
(2) Alternate service agency
In securitization transactions, the service institution is often the initiator. The bankruptcy of the initiator may result in the loss of copyright value due to lack of maintenance and the absence of the exercise of rights in securitization. There is an arrangement of "backupmanager" in intellectual property securitization in Europe and America. The so-called backup service institution is a third-party institution that is familiar with the basic assets and generally belongs to the same industry as the initiator. When the service provided by the original service institution fails to reach the promised level or encounters financial and operational difficulties, the alternate service institution will replace the original service institution, take over the operation and management of the underlying assets, and even participate in the bankruptcy liquidation proceedings of the sponsors. Of course, the performance of the duties of the alternate institution will be restricted by the framework of the bankruptcy system.
2. bankruptcy isolation of copyright license agreement
(1) Copyright license
The licensed use of copyright means that the copyright owner authorizes others to use his works in a certain way and within a certain space and time range. When the agreed time expires, the licensee will naturally lose the qualification to use, and the copyright still belongs to the Licensor. The biggest difference between it and copyright transfer is that when the subject of copyright is changed, it is transferred from one subject to another, but the subject of licensed use right is not changed. If the licensed use is a non exclusive use right, the copyright owner can continue to authorize the right to a third party to use it, so as to obtain licensing income. As a commercial application form of intellectual property rights, copyright licensing plays a very important role in securitization.
(2) Bankruptcy risk of license agreement
The bankruptcy risk of the license agreement mainly refers to that when one party of the license agreement goes bankrupt, the other party may face unexpected losses. In the case that the ad hoc carrier is the licensee, the Licensor is the debtor of the bankruptcy application. If the Licensor refuses to continue to perform the copyright license agreement, the ad hoc carrier will lose the licensed right to use the copyright, and can only institute a default action against the bankrupt. The claim right of the default action is included in the bankruptcy debt as a general creditor's right.
If the ad hoc carrier is the Licensor and the licensee is the debtor of the bankruptcy application, the ad hoc carrier will lose the income from the copyright license and directly affect the cash flow in the asset pool. In the first case, when the Licensor goes bankrupt, the best risk prevention strategy is to give the Licensee a certain option, that is, in addition to participating in the bankruptcy proceedings as a creditor, it also has the right to choose to retain the rights under the license agreement, which gives the impetus for the copyright to continue to be used for commercial development, and the bankruptcy risk of the license agreement will no longer exist. In the second case, only re authorization can be sought.
(3) Bankruptcy risk of ad hoc carrier
Ad hoc carrier bankruptcy can be divided into voluntary bankruptcy and involuntary bankruptcy. The prevention of voluntary bankruptcy risk is mainly restricted by restricting the right of ad hoc carriers to apply for bankruptcy: first, it is restricted by the articles of association of ad hoc carriers; Second, it is prevented by setting up independent directors. Independent directors have the veto right when submitting bankruptcy applications, modifying the company's organizational documents and substantially changing the company's objectives. When legislating on special purpose companies, it is necessary to clarify the rights and obligations of independent directors to ensure the realization of their supervision functions. For the prevention of involuntary bankruptcy risk, the main measures are to limit the creditor's rights of ad hoc carriers. The common measures are: first, the business scope is limited. In order to avoid the bankruptcy of ad hoc carriers caused by debts arising from business activities unrelated to securitization, the business scope of ad hoc carriers is limited to asset securitization business in the articles of association of ad hoc carriers; The second is to restrict the relevant guarantees and liabilities of ad hoc carriers. In addition to undertaking the debts and guarantee obligations of securitization business, ad hoc carriers generally cannot provide guarantees for other institutions or individuals, and should not incur other debts; Third, the ad hoc carrier cannot be restructured or merged before paying off to investors, so as to ensure that the underlying assets will not be affected in any way. In short, during the establishment and existence of the ad hoc carrier, regulating its business scope, debt and guarantee can avoid its voluntary and mandatory bankruptcy risk on the one hand, and is also a necessary means to ensure that the ad hoc carrier and its transactions are independent entity transactions on the other hand. In addition, in the securitization system, it is necessary to clarify the right relief for investors after being infringed. At present, there is no relevant law and regulation for investors to claim for compensation in China, so it is necessary to strengthen the supporting legislation so that investors can obtain compensation through judicial relief under more clear legal provisions.
2 Legal risk
In the process of securitization transaction, it is inevitable to need the support of legal system. The securitization of film assets is regulated by many laws, such as the securities law, the contract law, the trust law, the bankruptcy law, the copyright law, the film industry promotion law and other laws and regulations, as well as departmental regulations such as the management and handling of trust and investment companies, the measures for the registration of copyright pledge, and the guidance on the evaluation of intangible assets of cultural enterprises, which stipulate the legal relationship of securitization and the rights and obligations of relevant parties, Together, it constitutes the legal basis for the operation of film asset securitization. However, at present, film asset securitization is still a new thing in China, the relevant legal system is not perfect, and there are still some contents in the existing legal system that hinder the development of securitization, which brings legal risks.
1. legal barriers to "real sales"
To realize asset credit financing in asset securitization, the key is to ensure that the assets that generate cash flow are isolated from the sponsors, so as not to be affected by the bankruptcy of the sponsors. Therefore, "real sales" is a crucial step in securitization. The current provisions on "real sales" include the Interim Provisions on accounting treatment of related businesses such as debt financing receivable between enterprises and banks and other financial institutions promulgated in 2003, requirement "When an enterprise sells accounts receivable to banks and other financial institutions, it shall conduct accounting in accordance with the principle of substance over form, and pay full attention to the economic essence of the transaction. If there is clear evidence that the transaction meets the conditions for sales recognition, it shall be treated as selling the receivable creditor's rights, and the relevant profits and losses shall be recognized; however, if the transaction provides for the recourse clause, it shall be treated as pledged loans. If there is no evidence that the transaction meets the conditions for sales recognition, it shall be treated as selling the receivable creditor's rights, and the relevant profits and losses shall be recognized. However, if If conditions are met, the loan obtained by pledging the receivable creditor's rights shall be subject to accounting treatment. " The recognition and measurement of financial instruments and the transfer of financial assets issued by the Ministry of Finance in 2006 also stipulate that "in the process of transfer of financial assets, if the enterprise has transferred almost all the risks and rewards of the ownership of the financial assets to the transferee, the recognition of the financial assets shall be terminated, and the financial assets or financial liabilities shall be written off from the enterprise's accounts and balance sheets, which is deemed to be a real sale." The above two items are the standards of "real sales" based on accounting treatment rules. However, in the legal field, there is still some uncertainty in the identification of "real sales" and entity merger, which will inevitably lead to the corresponding increase in the risk of the entire transaction structure. In addition, China's enterprise bankruptcy law gives the bankruptcy liquidator the right to terminate the contract to be performed, which has a certain impact on the bankruptcy risk isolation of securitization, and is not conducive to the risk prevention of securitization in practice.
2. notification system on assignment of creditor's rights
Article 80 of the contract law of the people's Republic of China stipulates that "if the creditor assigns its rights, it shall notify the debtor. Without notification, the assignment will not be effective for the debtor." It can be seen that there is no legal obstacle to the transfer of creditor's rights in China, but how to realize the effective transfer of creditor's rights in practice, that is, to perform the obligation of notification, has become a problem, especially in the process of asset securitization, when there are a large number of basic assets or debtors, notifying the debtors one by one will reduce the efficiency of asset transfer and increase the cost of securitization. Therefore, in practice, we should set up "right improvement measures" to make modifications, but the legal effectiveness of this practice remains to be discussed.
3. lack of legal support for the establishment of ad hoc carriers
From the perspective of current relevant laws and regulations in China, special purpose companies are restricted in terms of Taxation and bond issuance, and cannot act as ad hoc carriers in film asset securitization; However, the regulations on the administration of asset securitization business of securities companies and fund management companies' subsidiaries, which is the basis of the special purpose entity, that is, the "special asset support plan", is only a departmental rule, not a law passed by the National People's Congress. Although Article 1 of the provisions clearly states that it is formulated on the basis of laws and regulations such as the securities law, the securities investment fund law and the Interim Measures for the supervision and administration of private investment funds, the upper law of the securities investment fund law is the trust law, and the intention of incorporating the securities investment fund law into the upper law may be to clarify the applicability of the trust legal relationship to enterprise asset securitization from the legal level, It has laid a solid legal foundation for the special plan as a special carrier to realize bankruptcy isolation. However, neither the securities investment fund law nor the securities law has explicitly included the special asset plan. Therefore, there is some uncertainty about the bankruptcy isolation effect of the asset specific plan. In addition, in the process of securitization, the special plan and the original equity holders do not sign the trust contract, but sign the "asset purchase and sale contract". According to Article 8 of the trust law, the establishment of the trust relationship requires a clear expression of intention between the parties to the trust and is carried out in writing. This shows that there is a lack of clear intention between the parties to establish a trust. In addition, according to Article 6 of the securities law of the people's Republic of China, the securities industry, banking, trust and insurance are operated and managed separately, and securities companies are established separately from banking, trust and insurance business institutions. Therefore, securities companies are not allowed to operate trust business, and the ad hoc carrier relied on for enterprise asset securitization is interpreted as the special purpose trust applicable to credit asset securitization, which may violate the requirements of separate operation.
To sum up, it is an urgent need for the legal system to keep pace with the times at a specific stage of China's economic and social development. In the future, with the development of asset securitization business, there may be a breakthrough in the provisions on the issuance of securities by special-purpose companies, and the top-level design of special-purpose entities will also be improved.