INDEPENDENT FILMS BOLSTERED NEW FEDERAL PROGRAM BACKS LOANS TO PRODUCERS.

Byline: Marla Matzer Rose Staff Writer

BEVERLY HILLS - In the first effort of its kind to bolster Hollywood's film industry, federal officials said Thursday they are initiating a loan guarantee program for independent productions that could trigger up to $100 million in funding during its first year.

The program by the Export-Import Bank of the United States is limited to members of the American Film Marketing Association, a trade group of the independent film industry, and qualified lenders. It will generally provide 90 percent of the financing for films with budgets between $1 million to $15 million.

The program is similar to loan guarantees the bank offers industries whose products or services are exported.

Independent projects - those not financed by major studios - employ about 150,000 people. The industry encompasses giants like Walt Disney Co.-owned Miramax down to small, low-budget operations that churn out cheap movies for TV and direct-to-video.

``The Film Production Guarantee Program we are announcing today will create jobs, promote international trade and contribute to the artistic legacy of American film,'' said Sen. Barbara Boxer, D-Calif., during a news conference in Beverly Hills.

It will provide a boost to an industry that already ranks among the nation's leading export industries and job providers, she said.

By providing a guaranteed ``safety net'' for banks, the Export-Import Bank expects to make more money available for production, thus stimulating more film jobs in the U.S. and Los Angeles county.

While claims this measure will solve the problem of ``runaway production'' to Canada and elsewhere, producers and representatives of the Los Angeles film office are optimistic about the program's effect.

``Any time you make it easier for producers to stay here, it's good,'' said Morrie Goldman, spokesman for Los Angeles' Entertainment Industry Development Corporation, who called the announcement a positive sign.

Kathy Morgan, chairman of AFMA and a longtime foreign sales agent for independent films, said the program sends an important signal.

``I'm not sure the government has really taken our industry that seriously, even though we're one of the top export industries in the nation,'' Morgan said. ``I consider myself a citizen of the world - I travel all over - but as an American and a native Angeleno . . . I think this signals that the film industry is a valued American business.''

Jackie Clegg, vice chair and chief operating officer of the export bank, said coming up with the right program was a tough battle that took several years.

Here is how the program works. An independent producer finances his film by preselling it to distributors around the world prior to the start of production. Based on the track record of the movie's producers, director and stars, international distributors calculate how much they will pay to show the film, then sign a contract with the producer for that amount.

The producer then takes those contracts to a bank to secure a loan.

Many banks are skittish about lending against contracts from ``secondary markets'' in places such as Russia and Southeast Asia, where the currency is volatile.

Thus, many producers can only get a loan equal to the amount of their contracts with major markets such as Western European countries.

The EIB will, with a number of conditions attached, guarantee to banks that they will be covered for any losses.