Tuesday, March 29, 2011

Magma - the tangled MESH in Galway

I've been trying to work through the intricacies of the Magma meltdown.

Anyone trying to disentangle the myriad companies will find there's a large number of distinct entities in the knot - connected, affiliated or otherwise in business with each other in Ireland and elsewhere. Some of them dissolved (Magmacharta Ltd), others seemingly disposed of (Ulysses Filmproduktion Gmbh), and numerous production service vehicle companies (Thorsday Films Ltd) most of which are dissolved.

The main players in Ireland appear to be Magma European Scripting House Limited (often trading under the business name 'Magma Films') and Magma Productions Limited. Magma European Scripting House Limited (MESH) is the business that is in trouble but it is not entirely clear if any other associated companies may be going out of business.

The creditors meeting called for 9am on March 18 was over (or adjourned) by 9.02am. There was no liquidator present and the many creditors who attended were left pretty much in the dark about the company's affairs. One might be forgiven for thinking it was a fiasco.

It emerged that there are quite a few individuals and service companies working in the film business that are owed what are, to them at least, significant sums of money on foot of work they did for MESH Ltd/Magma Films.

To these creditors can be added the Revenue, Anglo Irish Bank, Allied Irish Bank and other businesses. It is uncertain whether funding sourced from Forbairt and Enterprise Ireland would be subject to a claw-back provision in the event of the closure of MESH

The Irish Film Board is but one of many entities that hold security, debentures or charges against MESH or other Magma companies' assets and productions. The others include Millimages SA and Anglo Irish Bank. It is hard to see how film assets with projected revenues of €5.8m in MESH's 2007 accounts could be realised to meet the company/ies' liabilities if they are already to some degree mortgaged or assigned.

Magma's introduction to Anglo Irish Bank may have been through the Company Development Initiative (CDI), a scheme established by the Irish Film Board and Anglo in late 2001. It was intended to boost the development and business capacity of five production companies, one of which was Magma Films. The three-year scheme was launched in November 2001 with the IFB contributing €3.175m and Anglo contributing €1.9m.

Millimages (Fr) was a co-producer with Magma and Greenlight (De) on a 26x24" animation series called Simsala Grimm 2, a protracted project which I believe started in 2007 and concluded only late last year. The IFB did not back the project and it is unclear if it accessed Section 481 funding.

Creditors are wondering how a company that has not furnished annual accounts since 2007 has successfully applied for loans from the Irish Film Board. One would have thought that an up to date tax clearance certificate and previous year's annual accounts would be a pre-requisite both for applying for IFB loans and for official co-production validation.

Yet Magma Films, the trading name of MESH Ltd, is credited with an IFB production loan offer of €150,000 in December 2010, a development loan of €10,000 in July 2010, a production loan of €85,000 in April 2010, and a production loan of €450,000 in May 2009. Meanwhile, MESH effectively writes off €873,218 of IFB loans in its 2007 accounts, saying repayment is contingent on film earnings that are unlikely to materialise.

MESH is also a beneficiary of financial support from the MEDIA programme of the EU in respect of Oops, Noah is Gone (€50,000 2009), and The Guards/Jack Taylor (c. €100,000 2009).

As to whether another company - Magma Productions Limited (co-recipient this month of €600,000 from Eurimages) - is a viable business, one notes on the register of submissions to the companies office: B47 NOTICE(LETTER) OF RESIGNATION OF AUDITOR REGISTERED 18/01/2010.

This might lend some credence to the story doing the rounds that auditors to MESH Ltd resigned in Spring 2009. Not long after the set of abridged accounts for 2007 were submitted.

The MESH Ltd creditors' meeting has been rescheduled for April 12.

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