Q. What is a motion picture completion guaranty?

A completion bond is a guarantee that (1) a motion picture will be completed; (2) subject to certain conditions, limitations and exclusions, all costs of production have been paid or will be paid when due; and (3) certain physical film, sound and documentary items that conform to certain predetermined technical and non-technical specifications will be made and delivered to distributors who have agreed to make a payment if those items are timely delivered. The producer usually secures a completion bond for the benefit of a bank, other financial institution or investors to induce it to loan or otherwise provide the financing needed to produce the film. The agreement by each distributor to pay the delivery payment to the financier coupled with the completion guarantor’s guarantee that the film will be completed and timely delivered to the distributor, provide security to the financier providing the production funds to the producer. For the completion guarantee to be effective, the strike price (i.e., all items of negative costs contained in the budget approved by the completion guarantor) must be made available from the financier to the producer.