gap-collateral - MediaHedge Underwriting Knowledgebase

# Gap Collateral Gap financing advances against a discounted portion of the potential value of verified unsold film or television rights before binding licenses exist. The asset is market-dependent rights and future sale proceeds—not cash, a guaranteed sale or a contracted minimum-guarantee receivable. > [!warning] Evidence Limitation > The quantitative limits and pricing statement below appear in undated internal briefs. They explain the sourced framework but must be checked against current approved policy before use. ![[assets/diagrams/repayment-source-map.svg|Conceptual map distinguishing unsold-rights value from contracted receivables and other repayment sources]] *Conceptual view: gap value can convert into stronger contractual receivables as licenses are executed, but the estimate itself is not a payment obligation.* ## The Collateral Structure 1. **Verified unsold rights:** a rights schedule identifies available territories, media, languages, windows, restrictions and liens. 2. **Supported low estimate:** a credible sales agent provides territory cases grounded in comparable sales, buyer demand and current market conditions. 3. **Conservative advance:** unsupported, duplicative, stale, unavailable and encumbered value is excluded before every [[wiki/concepts/loan-sizing|sizing limit]] is applied. 4. **Completion and sales execution:** [[wiki/concepts/completion-protection|Completion Protection]] supports delivery while the sales arrangement governs marketing, reporting and license execution. 5. **Proceeds control:** the [[wiki/concepts/security-package|Security Package]] covers the rights, future licenses and proceeds, which flow through [[wiki/concepts/cash-control-and-waterfalls|Cash Control and Waterfalls]]. ## From Estimate to Receivable | State | What Exists | Principal Risk | Primary Control | | --- | --- | --- | --- | | Unsold rights | Available rights plus an estimate of possible value | Ownership, market demand, valuation, correlation and timing | Rights schedule, chain of title, low-case support and conservative advance | | Executed license | Identified distributor and contractual minimum guarantee | Delivery, acceptance, obligor credit, defenses and deductions | [[wiki/concepts/pre-sales-collateral\|Pre-Sales Diligence]], assignment and acknowledgment | | Collected cash | Cleared proceeds in the controlled account | Diversion, priority, deductions and reconciliation | [[wiki/concepts/cash-control-and-waterfalls\|Cash Control and Waterfalls]] | ## Sourced MediaHedge Rails The available material states that gap exposure is limited by the tightest applicable constraint, including: - advance no greater than 50% of supported low value; - gap generally no greater than 30% of the final gross loan; - aggregate LTV no greater than 60%; - gross loan-to-budget no greater than 80%; - term generally no longer than 15 months. The same source states that gap inclusion generally contributes approximately three to five percentage points to blended pricing. That is an undated internal pricing statement, not a forecast of financier return. Transaction mix, cash timing, extension, loss, [[wiki/concepts/monitoring-and-servicing|servicing]] and actual loan-tape performance control [[wiki/concepts/financier-return-economics|realized economics]]. ## Diligence Questions - Does the borrower own the rights, and are the identified territories and media genuinely available? - Are the sales agent's authority, experience, comparable titles, buyer evidence and actual record supportable? - Does the low case reflect commissions, taxes, currency, timing, overlap and realistic collection costs? - Which sizing rail binds after stress, and does the loan remain [[wiki/concepts/full-financing|fully financed]]? - Are future licenses, notices, proceeds and account directions captured by the security and cash-control structure? - How much [[wiki/concepts/portfolio-construction|portfolio exposure]] shares the same sales agent, genre, buyer market, delivery window or territory assumptions? ## Limits and Evidence A sales estimate is an opinion of potential value. It can fail because of weak demand, delayed delivery, rights conflicts, optimistic comparables, currency, tax, commissions or expenses. Territory values may be correlated, and completion protection does not ordinarily pay because unsold rights underperform. Pricing cannot cure unsupported value, concentration or a broken repayment timeline. ## External Context Screen Australia's current [Market and Audience Insights](https://www.screenaustralia.gov.au/market-audience-insights/) reviewed distribution advances, minimum guarantees, pre-sales and gap across 197 feature-film and television applications submitted from January 2023 through October 2025. The agency describes marketplace funding as important but rarely sufficient by itself. Its official [Finance Plans Explained](https://www.screenaustralia.gov.au/podcast-finance-plans-explained/) guide distinguishes pre-sales from gap loans based on reputable sales-agent estimates for unsold territories. These sources support the conceptual distinction and the need for layered financing; they do not validate a MediaHedge estimate, advance rate, concentration limit or price. Links checked: 2026-08-09. ## Continue Exploring [[MediaHedge Knowledgebase|Home]] · [[wiki/syntheses/financier-diligence-route|Financier's Guide]] · [[wiki/syntheses/credit-lifecycle|Credit Lifecycle]] · [[wiki/syntheses/repayment-and-risk-map|Repayment and Risk Map]] · [[wiki/concepts/pre-sales-collateral|Pre-Sales Collateral]]