What's a HedgeLoan?

At HedgeLender LLC, we hope and believe as we always have that our services can be a useful complement to your existing securities finance and long-range financial plans. That's the spirit behind the original HedgeLoan®, and it continues to define this, our signature brand.

We facilitate securities-backed loan quotes with a variety of custom features, but our original loan offering has always been our trademark HedgeLoan®. From the start, it has been a loan in which the risk of loss was structured with some form of risk reduction or mitigation. "Hedge" in both our name and our brand has therefore always meant only what the dictionary has always said it means:

Today HedgeLender only offers institutional, stay-in-account/title funding through a major U.S. brokerage and banking firm, and HedgeLoan® applies solely to our Premier stock loan program. The intention of this process is to mitigate to some or, ideally, the majority of the risk to the lender (and thus indirectly to the borrower) in the event the borrower defaults on the loan. This is the essence of what we call a "limited recourse" securities-backed loan.

With Premier HedgeLoan® only one form of hedging is used, one where the client authorizes purchase of a "put" option as part of the loan, thereby helping to fix lender risk of portfolio loss sufficient to enable the limited recourse-style loan (one in which the client's liability should they default on repayment can be limited, in some cases to the collateral alone that secures the portfolio, even if the securities in that portfolio have dropped precipitously in value at loan maturity.) These loans come with no margin calls, interest-only terms, and higher loan-to-value than is common with conventional margin loans, and operate under the purpose credit restrictions of FRB regulations U, T, and X, the most of important of which prohibit use of proceeds for the repurchase of marginable securities.

Like all HedgeLender Premier securities loans, these loans allow prepayment at any time with zero penalty, loan-to-value at up to 95% (for selected federal securities), and the ability to swap the collateral shares for similar collateral in the middle of the loan term. They represent a professionally managed, very secure, well-structured form of financing in a U.S. SIPC-member institutional with a proven track record covering many custom securities-backed loan variations. A licensed advisor is assigned to very client as well.

So to recap: HedgeLender offers a range of institutional, stay-in-your-account-and-name securities-backed loan services we call Premier, and the idea behind our Premier HedgeLoan is simply to reduce lender risk to a point acceptable to the lender, to limit recourse to the lender to recoup what the borrower owes primarily to the collateral shares. This type of securities loan structure is only open to those portfolios where that is optionable.

When the lender does not use any other asset beyond the collateral securities and the exercise of the option to satisfy the debt, then it is essentially a limited-recourse loan, and this can serve as a hedge in the case of default. The lender may also add various additional features for the borrower per his risk model and borrower preferences, and provide an attractive securities loan option for owners of stock or other securities in the process.

It is always important to fully understand your contract and your loan terms. We at HedgeLender LLC strongly urge you to ask questions and to have your loan contract reviewed by a third party prior to signing, particularly if you are undertaking a HedgeLoan structure. Full disclosure and information is available on any and all HedgeLender loan services. HedgeLender also urges our clients to speak freely with their licensed financial advisor to ensure that any and all questions are answered prior to their concluding of any loan offered through our services. HedgeLender staff are, of course, always available to assist you by email, phone, or in person.

We are proud to say that your HedgeLoan or any of our other securities-backed lending services can be an excellent solution to your existing financial challenges or objectives. At HedgeLender LLC, we will continue to strive to find ways to provide better products and services as we grow to ensure maximum choice for our clients.