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Non Recourse Loans - Introduction

Date post: 05-Apr-2016
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Securities Backed Lending Introduction Europe Asia Australia Canada Mexico South America Africa Caribbean
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Page 1: Non Recourse Loans - Introduction

Securities Backed Lending

IntroductionEurope

Asia

Australia

Canada

Mexico

South America

Africa

Caribbean

Page 2: Non Recourse Loans - Introduction

First, we discuss procedures and terms for Non Recourse Stock Loans in Non-US Markets*.

The biggest difference with foreign markets is that transfer of title takes place, compared to US markets where there can be no transfer of title.

*This includes USA dually listed stocks

FOREIGN MARKETS

Page 3: Non Recourse Loans - Introduction

Securities Backed Loans or Non Recourse Stock Loans are recognized around the world as an alternative source of working capital for companies and individuals. Typical broker margin accounts offer 50% loan-to-value compared to Securities Backed Loans that offer of up to 85% loan-to-value. The interest rate is also substantially lower than traditional margin accounts.

The entire process can take as little as a week to finalize. The terms are always negotiable, flexible and tailor-made to suit the borrower. There are no maximum loan amounts.

With a Securities Backed Loan for a stock listed in a Foreign Exchange, title passes from the borrower to the lender when the loan is issued, and then back to the borrower when the loan is repaid. This process is accomplished electronically by DVP (Delivery vs Payment).

DVP assures the simultaneous delivery of funds and title to the borrower and lender.

Securities backed lending is

the sensible alternative.

Page 4: Non Recourse Loans - Introduction

Non recourse stock loans are used by global financial services firms, leading asset management companies, investment banking houses, prime brokers, and high-net-worth individuals to retire high-interest debt, refinance margin accounts, for acquisitions and mergers, leveraged buyouts, and bridge loans.

NPG’s strategic relationships with lending institutions offer proven and tested access to funding. The “non recourse” feature means the lender’s only recourse is the collateral being pledged. That means should the borrower decide to walk away from the loan the lender has no other recourse such as take legal action or blotch the borrower’s credit history.

Title always transfers to the Lender at closing, to ensure the Lender has complete control of the stock in case the borrower defaults. Therefore, escrows and other safekeeping strategies cannot be employed with a non recourse stock loan in foreign stocks.

Working capital for any purpose

These loans are not available for BG’s, MTN’s, SBLC’s or LTN’s.

Page 5: Non Recourse Loans - Introduction

Criteria

1. The Average Daily Trading Volume of the stock must be over $30,000 per day, for a period of three days2. The shares must be Free Trading2. The stock must trade in a non-USA stock exchange (except for Shenzhen and India exchanges)

Termsa. 1-3 year termb. Quarterly interest-only payments, with rates strarting at 2.5%c. Prepayment privileges in first 12-18 monthsd. LTV as high as 85%e. Borrower keeps any upside on price appreciationf. Loan can be renewed at the end of termg. Lender covenants not to short the stockh. Title transfers from borrower to lender at closing, and back to borrower upon repayment of the loan plus interesti. Failure to pay quarterly interst payments constitutes defaultj. Borrower may receive margin call if stock price drops by 20%

The direction of the market and the

fundamentals of the stock are irrelevant

Page 6: Non Recourse Loans - Introduction

A. The process begins with the borrower providing the stock symbol, the name of company, the stock exchange the stock is listed on, the number of shares being pledged and the size of the loan requested

B. A term sheet is presented to the borrower within 24 hours, and if approved by the borrower, the terms are set in contract. The term sheet is valid for 72 hours.

C. Once the contract is executed Delivery vs Payment takes place within 5 days - funds are transmitted to borrower as title to the shares transfers to lender electronically.

Note: No escrow services can be used.

Transparent Procedures

Page 7: Non Recourse Loans - Introduction

As there is no transfer of title with US-based loans, technically these are Lines of Credit.

With Lines of Credit the underlying asset can include ETF’s, mututal funds as well as stocks and bonds.

Through an exclusive arrangement with our U.S. Investment Banking partner, we offer a product specifically suited to Principals and Affiliates of Public Companies which is Rule 144 Compliant and offers a flexible range of options to assure you play by the rules and get the liquidity you need - with a name you can trust. In all cases your collateral stays in your OWN account, in a top-tier, fully regulated FINRA U.S. Institution.

US MARKETS

Page 8: Non Recourse Loans - Introduction

Criteria1. The price of the security must be $5 min2. Trading volume must be at least

200,000 shares per day3. The stock can be restricted, as long as it

will be Free Trading in two months4. Mutual Funds, ETF’s and bonds can

also qualify

Terms

1. Interest rate from 2%2. Monthly payments of P&I3. LTV as high as 85% for stocks, 95%

for other securities4. Account is opened in borrowers

name within Lender’s institution, and security is transferred to new account. Title stays with borrower.

5. Lender can force sale of security in case of default

6. Full compliance with Rule 1447. No application fee8. No transfer fee9. Ability to trade in your own account10. Your own Wealth Management

Bank Officer


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