The Gathering 2014

**MacMillan of Rathdown** · 8th March 12, 11:11 PM

Originally Posted by mookien

That should have never happened, and certainly should not happen again.

The public entity holding the rights to the event should insist (in a contract with the promoter/organizer) on a surety bond, or performance bond, that will cover at least a portion of subcontractors' costs in the event of financial default.

In the instance of the 2009 event the rights were held by a private company, in much the same way the rights to a concert in a park are held by the promoter, not the municipality that rents out the park.

In the motion picture and television industry it is possible to get what's called a completion guarantee bond, which assures the completion of the film/show if the producer exceeds the projected budget. When this happens the completion bond company becomes the owner of the film-- and when it is completed they recover their loss from the money generated by the marketing of the picture.

Unfortunately, it is virtually impossible to insure an event against loss for two reasons: (1) it can be weeks, or months, after the event before the true financial picture is known; (2) in the event of a loss, there is nothing the bond holder can attach to recoup his loss.

Originally Posted by mookien

Such bonds, though they act more like a "loan" in actual practice, provide insurance against bankruptcy.

This raises the question of who repays the "loan"? Generally the "repayment" is achieved by the bond issuer selling off the assets of the company that has defaulted. Where there are no tangible assets it is virtually impossible to get a bond.

Originally Posted by mookien

It surprises me that in the country (Great Britain) that invented modern insurance, this kind of protection isn't routine. Does anyone know why?

Probably because you can't insure against going broke.

**mookien** · 9th March 12, 01:11 PM

Originally Posted by MacMillan of Rathdown

In the instance of the 2009 event the rights were held by a private company, in much the same way the rights to a concert in a park are held by the promoter, not the municipality that rents out the park.

In the motion picture and television industry it is possible to get what's called a completion guarantee bond, which assures the completion of the film/show if the producer exceeds the projected budget. When this happens the completion bond company becomes the owner of the film-- and when it is completed they recover their loss from the money generated by the marketing of the picture.

Unfortunately, it is virtually impossible to insure an event against loss for two reasons: (1) it can be weeks, or months, after the event before the true financial picture is known; (2) in the event of a loss, there is nothing the bond holder can attach to recoup his loss.

This raises the question of who repays the "loan"? Generally the "repayment" is achieved by the bond issuer selling off the assets of the company that has defaulted. Where there are no tangible assets it is virtually impossible to get a bond.

Probably because you can't insure against going broke.

Actually, a private company can be insured against "going broke" in the performance of a contractual obligation, and it happens all the time, at least in the U.S.

I spoke with a surety/performance bond expert at a large insurance company, which shall remain nameless for their protection against my inadvertent misrepresentation.

Thus, take the following with a grain of salt, and please correct me, if/where necessary.

First, surety bonds are not insurance. They are more like a short-term loan. They are most often written for liability, but they are also written to assure that a contractor's subcontractors will be paid. Those are called "payment" bonds and are the subject with which we are dealing.

The bond is acquired via contract at the time the municipality (Stirling) grants the rights to a private company (Semple). The underwriters for the insurance company examine Semple's financial strength with a fine-toothed comb. Based on their risk analysis they set the fees for the "loan", ie bond.

The bond is placed in escrow. If everything goes well and all the subcontractors are paid, the bond amount plus fees (including short-term interest, I assume) are paid to the insurance company, and they make a profit. Everybody's happy.

If Semple declares bankruptcy, then a lot of the important details are determined by the contract, and often the courts, but in general the subcontractors will, at least in part, be paid from the bond. The important point is that they won't simply be left holding the bag. The insurance company incurs a loss, has a Dutch-uncle talk with its underwriters, and puts the loss in the debit column of its financial sheets under "Accounts Uncollectible".

Now, after all this trouble, some expert will write in and tell us all how wrong the above really is. If so, I will welcome it and take it as a blessing in disguise.

**mookien** · 9th March 12, 01:36 PM

Originally Posted by Mael Coluim

Since we have two discussions going on in this thread; the first information on the upcoming 2014 Gathering., and the second, a discussion about the financial loss of the 2009 Gathering and what can be done not to repeat the situation for the 2014 Gathering. Let’s separate the threads:

The Gathering 2014 – Upcoming Event News

The Gathering 2014 – Not repeating the financial failure of the 2009

Mael,

Excellent idea!, ... if it can be done.

John