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An Institutional Stock Loan and Securities Financing Solutions for Securities Owners and Advisors
An institutional securities loan is a loan that can be structured as limited recourse financing made possible when an eligible portfolio with optionable securities is available for use as collateral and an option (or collar) is purchased and structured into the loan reduce lender risk of loss should the client default on his loan obligation. It is a premium loan program among the stay-in-your-name/account loan services that make up the institutional financing choices we offer.
Key Features
With this program shares remain in borrower's title and account. Top tier U.S.-brokerage management is provided, and the resources of an established equity fund support the entire loan process (and offers). Collateral receives a simple lien to secure the loan. Quick closing. Prepayment any time, no penalty. Up to 95% loan-to-value available with certain securities (see table at right). Full voting rights remain with borrower while shares secure loan. Swap one set of securities for another even while they are collateralizing the loan (requires lender's consent). Additional loan cash possible if portfolio rises in value during the loan term.
Underwriting Requirements
Accepted: Publicly traded stocks, municipal/state/federal securities, exchange-traded funds, and all forms of mutual funds. See the table at right for full list. $100K minimum portfolio size. Foreign shares accepted with strong volume in most non-U.S. markets. Best LTV for portfolio's over $2M in initial value. CMO's and other mortgage-based securities acceptable (Ginnie/Fannie Mae) or others if bundled with equivalent amount of quality securities. Optionable securities of all types get best terms. .
Average Daily Volume/Low Volatility
Healthy market for the securities; a strong volume of trading over time. (Use the average four-week volume figure as a guide.)
No Red Tape
Need it fast? Premier offers less paperwork and no FICO scores. Simply show that you have assets sufficient to service your loan.
Note: Borrowers must be willing to produce evidence of assets sufficient to service loan payments for document filing and regulatory purposes. However, these documents are not used to determine characteristics of the loan offer but are instead used to comply with regulatory requirement designed to ensure evidence of borrower's ability to service their quarterly loan interest payments.
Features / Benefits:
Institutional Security
Never moved, sold, or modified. Well-known, top-tier national brokerage/bank. SIPC-member coverage identical to any standard brokerage account. Option hedge purchased by institution at borrower's direction and structured into the loan for additional security (please see Options Clearing Corporation for information on public options and options purchasing)*
Interest Rates
Interest rates based on monthly LIBOR + 4%. (At time of last update, about 4.35%. Please inquire for latest rates).
Maximum Loan-to-Value
Up to 95% of current market value of the securities pledged. Best LTV's for optionable shares. (See table at right).
Non-Callable Feature Standard
Premier HedgeLoans cannot by definition be called (i.e., lender requiring client to come up with additional stock/cash for any reason, regardless of drops in prices) making them a fully "no-margin-call" loan. Note: A callable variant is also available that may permit higher LTV in some cases in exchange. Inquire for more information and quote.
Available to Financial Institutions
We've added our knowledge of client requirements to the resources of a large equity fund and expertise of leading U.S. bank/brokerages to make this form of lending possible for a wide range of securities owners. Existing financial services may thus add Premier securities loan products to their current services to enhance their clients' choices. Inquire for more information.
Payoff Anytime, Without Penalty
Pay off your loan if you decide you want to unfreeze the stocks for your own use - anytime you like, without restriction. If prices go up and your stocks are worth a lot more, for example, you may seek to unfreeze and sell them. With a Premier stock-secured or securities-backed loan, you can do so. You can pay the loan off with cash directly, or ask lender to sell enough shares to pay off the remainder of the loan. Liens are removed promptly upon repayment and full control returned to you.
Fast Funding
Delivery of loan cash within 72 hours of signing loan documents is normal, though actual time may be slightly less or slightly more depending on the particulars of each client. Funds are deposited directly into your checking account.
No Up-front Costs
Our fees are deducted from loan proceeds, so there are no true out-of-pocket costs until your first quarterly interest payment is due after three months. No advance processing fees or other application fees.
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Sample Maximum Premier Loan-to-Values (LTV's):
Note: Maximum LTV's require strong daily trading volume and price. Securities with public options receive best LTV's.
| - US Treasury Notes/Bills |
95% |
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| - US Treasury Bonds/Strips |
92% |
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| - Fannie Mae & Ginnie Mae CMO's |
90% |
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| - Federal Home Loan CMO's |
90%
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| - Free-trading U.S. Stocks |
85% |
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| - US Government Agency Bonds |
80% |
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| - Municipal Bonds |
80% |
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| - Corporate/Non-convertible Bonds |
70% |
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| - Foreign Sovereign Debt |
70% |
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| - Convertible Bonds |
50% |
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| - Exchange Traded Funds |
50% |
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| - Unit Investment Trusts |
50% |
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| - Variable Rate Demand Obligation |
50% |
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| - Warrants |
50% |
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A Limited Recourse Loan In Default
With An institutional securities loan, if you should find that you have no choice but to default, you can normally do so with less fear of attachment of any other assets (e.g., a lien on your house or other bank account) or any negative effect on your credit rating. If the option has been structured into your loan, default will usually mean that surrendering your shares and exercising the option will fulfill your loan obligation, no matter how low the value of the stock portfolio at the time of default. This is not guaranteed, of course; risk is never completely eliminated with a HedgeLoan just as it is never completely absent from any securities transaction. But it can mitigate lender risk of loss through the surrender of the shares and the exercise of the option.
An "Equity Line of Credit" Feature
Not enough control? Premier loans, including Premier HedgeLoan, feature a line-of-credit style provision that will allow you to modify your loan mid-stream to take more loan cash out if the portfolio has risen consistently. This is available when and if your shares have moved up in value and retained that status. (Please note that additional loan cash credit is not automatic, but is rather at lender's discretion and a review of all factors. Eligible portfolios should maintain a higher value over a reasonable period of time prior to consideration).
All the Growth in Portfolio to the Borrower
No asterisks, no fine print. Every last penny of value in your securities portfolio belongs to you in our standard model Premier HedgeLoan®. There is no lender participation or claim to any of the upside growth in your stocks if they appreciate in value over time. (Note: "lender participation" variant of Premier is also available for those who may seek a higher loan-to-value in some cases. Please inquire for more information.)
Dividends to Interest, or Dividends to Client
They're your securities and it's your loan. You decide. Your dividends can go to you, or you can ask to have them credited against the interest owed on the loan. The choice is yours. (Note also that you can vote your shares directly as always, too.)
Regular Account Statements
You'll get monthly/quarterly brokerage statements just like you do now, all direct from the full regulated U.S. SIPC-member brokerage institution managing your portfolio.
Multiple Exit Choices
Ask lender to sell enough of the stock to pay off the loan. Or modify the loan while getting cash out under the line-of-credit provision. Or pay off the principal out-of-pocket with your own cash in the normal loan payoff fashion. If you cannot handle the interest payments for any reason and must declare default, you can exercise your limited-recourse exit rights with fulfillment of loan obligation through the exercise of the option and no negative credit reporting upon surrender of collateral. You can also consider a simple rollover ‒ renewing your loan on the same or better terms. Or create a custom exit with the licensed financial advisor from your managing institution who will consult with you to develop your final loan agreement. Again, the choice is yours with HedgeLender LLC securities finance.
If you are interested in obtaining more information, please Contact the service provider directly here. |
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