Review: Acamar Films – 8.5% p.a. secured loan notes
This private offer aims to raise up to £4.1 million to re-finance existing bank debt in Acamar Films Limited (“Acamar”) in the form of loan notes secured against Acamar’s assets. £3.1 million of these loan notes are available to Wealth Club investors.
Acamar is the independent film and television company that owns the rights to Bing, the UK’s number-one-rated preschool children’s show on BBC’s CBeebies. Bing, currently broadcast in 117 territories, has rapidly growing sales from its media, digital and licensing activities.
The loan notes offer a fixed rate of interest of 8.5% p.a. gross paid quarterly over a three-year fixed term, with capital repayment at maturity. Interest is subject to 20% withholding tax.
Acamar has been running a loan note programme since 2014 and has not defaulted on any capital or interest payments, although past performance is not a guide to the future. Interest is not guaranteed.
- Fixed rate of 8.5% p.a. gross paid quarterly – not guaranteed
- Fixed three-year term
- No capital or interest repayment defaults to date
- Fixed and floating charge over all company assets, subject to senior ranking priority given to bank facility of up to £2 million
- Company appears to be on track to generate over £6 million revenues in the current financial year, forecast to increase to £23.4 million by 2022 – not guaranteed
- Forecast EBITDA of £10.7 million by 2024 – not guaranteed
- Latest company valuation £52.5 million
- The CEO and his family have so far invested more than £9 million
- Evergreen brand potential, which could generate revenue for many years
- Minimum investment of £20,000
- Application deadline for first issue 20 August 2019
Request access to the offer documents
Attractive fixed rate
The Acamar Secured Loan Notes offer 8.5% p.a. gross – not guaranteed.
Illustrative returns for different investment amounts – not guaranteed
|Interest rate (not guaranteed)||8.50%||8.50%||8.50%||8.50%|
|Gross quarterly interest||£425||£1,062.50||£1,593.75||£2,125|
|Gross annual interest||£1,700||£4,250||£6,375||£8,500|
|Total gross interest over three-year term||£5,100||£12,750||£19,125||£25,500|
The company will deduct 20% withholding tax at source and provide investors with a tax deduction certificate.
Interest is calculated and paid quarterly, with interest payments expected in March, June, September and December each year. The first loan notes are expected to be issued on 31 July 2019 and reach maturity after three years, in July 2022.
Rates and repayment of capital and interest are not guaranteed. Please remember tax rules can change and benefits depend on circumstances.
Acamar is raising up to £4.1 million (up to £3.1 million through Wealth Club) by issuing secured loan notes to refinance existing bank debt with Arbuthnot Latham.
This bank facility is guaranteed by Mikael Shields, Acamar’s founder and CEO, and his family. Once the current loan is refinanced and the guarantee released, they have committed to reinvest up to £2 million into non-EIS equity, thereby increasing cash in the business. You can find details of the current debt position in the document downloads, which you should read carefully if you wish to invest.
This current issue of secured loan notes is for a three-year fixed term and aims to pay gross interest quarterly at a fixed rate of 8.5% p.a..
The loan notes have fixed and floating charge over the company’s assets, subject to senior ranking priority given to a new banking facility of up to £2 million. No such facility is outstanding at this time.
In addition to the bank debt, Acamar created its first structured loan note programme in 2014 which rolled over into the current programme in November 2016. This has enabled £5.7 million of debt finance to be brought into the business (as detailed in the “Current Debt Position” document), bringing the total debt to £9.8 million. The offer is part of a £15 million loan note programme. The £5.7 million of existing loan notes, and any new loan notes, will be secured on a pari-passu basis.
As the new loan notes replace existing bank debt, the overall borrowing of the company does not increase.
The valuation based on the latest EIS fundraise is £52.5 million.
To date, there has been no default on any interest or capital payments, although please note past performance is not a guide to the future.
Acamar is an independent film and television production company based in Camden, London. It owns the rights to, and co-produces, the hit children’s TV show Bing.
Bing – a loveable and authentic three-year-old – entered the lives of British toddlers in 2014 courtesy of CBeebies, the BBC channel for preschoolers. Just five years later, Bing is the number-one rated preschool show and most successful programme in CBeebies’s digital history.
There have been 78 episodes to date and 26 new episodes are planned to be released in autumn this year. The launch of the new episodes will be accompanied by the launch of new Bing toys with Acamar’s new master toy partner, Golden Bear. There are currently over 80 licensing deals on Bing, active in multiple territories across several product categories, including clothing, magazines, book-publishing, toys, puzzles & games, experiential licenses (live theatre shows and character meet-&-greets), cinema screenings and DVDs.
Internationally, the show is currently available in 117 territories. In February 2018 it launched in Italy where it has proven a huge success: it is currently shown 14 times a day on the state broadcaster’s children’s channel, Rai YoYo (the Italian equivalent of the BBC’s CBeebies), as well as over 20 times a day each weekend on Pay-TV channel, DeA Junior. Italian audiences have responded so well to Bing that Acamar is experiencing significant increases in digital engagement and merchandising activity in the region. Currently, approximately 40% of Acamar’s digital revenues are generated from Italian YouTube audiences. Bing is also now being broadcast in Russia on Carousel, one of the country’s strongest children’s channels, where it is being shown 20 times each weekend. Additional platform broadcasting deals have been signed in Poland and Italy, and negotiations are taking place to launch in China and Japan.
However, the next major target is the US, considered the world’s most lucrative market for children’s IP. In preparation for the US launch, Acamar has spent the last two years and made significant financial investment to create a bespoke American version of Bing.
Online, Bing’s popularity is impressive: over 265 million requests on the BBC iPlayer and over 510 million views of Bing content on YouTube internationally since 2017, with 63 million views already in July.
Bing has the potential to be a global evergreen brand, such as Peppa Pig. Few assets of this calibre in children’s IP sector are still privately owned. Acamar has full control of the IP and entitlement to the vast majority of revenues (96% after payments to key talent and source rights).
Acamar has spent over £37 million to take Bing where it is today. Mikael Shields and his family have so far invested more than £9 million in equity and loan notes. The rest of the funding to date has come from the company’s trading revenues and tax credits as well as external investors via EIS equity investment and loan notes.
The company is currently loss-making, reporting accumulated losses to date of £13.4 million. However, its revenues continue to grow and are estimated to be over £6 million in the current year ending 30 September 2019. The company has sustainable cash flow from its trading activities, tax credits and ongoing equity and debt fundraising. It is expecting to generate profits in FY21 growing to £10.7 million EBITDA in FY24. You can see more details in the “Financial Forecasts” document, which is available to download.
Multi-award winner Mikael Shields, founder & CEO, is highly experienced, skilled and well connected in children’s media production, both in the UK and abroad, including in the US.
Mikael has led creative teams in senior roles at the BBC, EVA Entertainment, Pearson Television, Atom Films, Ealing Studios and now at Acamar Films. Mikael’s impressive career spans 30 years. Over this time, he has established an international reputation for identifying and producing a wide range of hit film and television projects including Nick Park’s Oscar-winning Wallace & Gromit, the global phenomenon that is Pingu, BAFTA-winning Hilltop Hospital, the multi-award-winning Flatworld and Aardman Animation’s Rex The Runt. Before launching Bing in 2014, Mikael spent years developing and perfecting the characters and storyline. He is responsible for the direction, strategy, content and overall success of the company.
Mikael’s family founded and recently exited from a large media and publishing organisation based in Dubai, which generated trading revenues across the Middle East and Asia in excess of $100 million per annum.
Mikael is well supported by a highly experienced and incentivised management team. There are currently 44 employees in the company.
How will the funds be used?
In 2018, Acamar launched its £12 million fundraising initiative to raise equity capital under EIS and refinance its debt through the Loan Note Programme. The capital raised will continue to support the company’s three main business developments:
- complete production of new episodes of Bing;
- invest in the digital and content division to become a global broadcaster; and
- invest in its commercial team to support Bing’s global expansion.
What protection do loan note holders have?
Remember, this is an unregulated private investment for experienced investors only.
The loan notes have fixed and floating charges over the company's assets, subject to priority being given to a banking facility of up to £2 million. No such facility is outstanding at this time.
This £2 million bank priority was incorporated to give Acamar the option to do short-term finance, such as contract discounting for a large contract with staged payments over time, which is not uncommon when licensing television rights to large counterparties.
Should such a facility be put in place, while the bank would take a general debenture, the prime security would be over the contract receivables itself which would be with a blue chip organisation, such as the BBC. So the chances of it needing to rely on the general debenture would be relatively low, in our view, although you should form your own opinion.
Diversified, growing revenues
In the current financial year, the company is expected to achieve 261% YOY growth from its diversified revenues from media, digital and licensing. The company also receives production tax credits, which are included in revenues, and has been well-funded from EIS equity investment.
Unusually Acamar owns 96% of its revenue rights, before recoupment of its project equity and after payments to key talent and source rights. If things don’t go to plan, it has the option of taking advances for its major trading partners, although this is not part of the company’s strategy.
Exceptional CEO and family commitment and alignment of interest
One of the main risks is that the company fails to achieve its forecasts and is unable to pay interest to loan note holders. This risk is somewhat mitigated – although not eliminated – by the significant investment into the business by the CEO and his family.
The company has never defaulted or been late to pay interest or capital obligations – although the past is not a guide to the future.
Independent Security Trustee
LGB & Co Limited, formerly Lesmoir-Gordon, Boyle & Co, is the independent Security Trustee acting on behalf of loan note holders. LGB is responsible for monitoring the company and ensuring there are no breaches to the Trust Deed. They meet with the company quarterly and attend board meetings. LGB has been in this role since 2014 when the loan note programme was first launched.
Please remember, though, this is an investment, so returns are not guaranteed and capital is at risk.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
This is a single company unregulated loan note offer with no diversification. It involves lending to one company only. Should that company not perform as planned repayment to the loan note-holders may be impacted.
Loan notes such as these are not readily realisable. They tend to be illiquid and hard to sell and value. They should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
You cannot ask for your money to be repaid earlier than the three-year term and there is no secondary market.
Although the rate of interest is fixed at the outset of the loan, should the company suffer trading difficulties, it may not be able to make interest payments at the rate set or at all. It could also be unable to repay your capital. In addition, you are lending to one company, so there is no diversification.
Tax rules can change and benefits depend on circumstances. As with all investments of this type, these loan notes are not covered by the Financial Services Compensation Scheme for deposits.
Should the CEO and family decide not to continue supporting the company, it may face cash pressure in meeting its capital repayments.
You should consider if the company has sufficient cashflow to service the debt and repay your capital in accordance with the agreed term. You will not benefit from any equity growth in the business.
Read more details on the risks in the Information Memorandum.
There is no initial charge and no other fees directly payable by investors. Acamar Films will pay Wealth Club a fund-raising fee of 5%. Acamar will also meet the costs of the offer (such as services provided by the registrar and receiving agent).
We believe these loan notes offer an attractive rate considering the company is starting to become internationally established and has the potential to increase its brand value substantially if it is successful.
It benefits from growing revenues (over £6 million expected in the current financial year) from diversified sources, from broadcasting to licensing and digital. Tax credits and ongoing equity investment strengthen its cash position. In our view, the company is well placed to continue to grow its revenues, reducing – albeit not eliminating – the risk of interest or capital default.
The high investment in the business from the CEO and his family (over £9 million to date) shows their commitment and alignment of interests with both equity and debt investors.
Overall, we consider this as a good fixed-rate investment opportunity for experienced investors, but you should form your own view.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.