| What's the FreeSpirit Solution? |
It is the opportunity to expand your business with
interest-only repayment or interest-accrued repayment while still
retaining participation in your stock portfolio using a Structured Securities Loan
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John Shareholder owns a farm with a
10% interest note that collateralized by all of his equipment and most
of his other farm assets. He needs expansion capital and owns 100,000
shares of the stock XYZ worth £10 a share, but he expects good news
this year that will boost the stock's price and doesn't want to
liquidate.
Solution: With a Structured Securities Loan at low interest fixed (or floating-rate Premier starting at 2points over 90-DAY LIBOR ), he can refinance
the farm, get the capital to grow the business and remove the liens
from all
other assets. If his favorite stock goes up, he can participate in
the upside, and if it goes down, he can exercise his right to default
on the loan (with no reporting to credit bureaus) and the collateral
stocks acting as full satisfaction of his repayment obligation.
The good news? Either way, he kept the capital he needed and grew his farming business.
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| Behind the Numbers:
Example:
- Note on farm : £500,000 @ 10% interest. Working capital requirement: £200,000. Total needed: £700,000.
- Proceeds from 75% LTV Structured Securities Loan of £1MM of the stock XYZ: £750,000.
- He
saves at least £15,000 per year in interest expense on the existing £500,000 note on the farm. He can invest £200,000 in new land,
supplies, etc.
- He
can participate in upside of stock (or securities, if appreciable) if
they rise in value, and freely exercise the default option if necessary.
In
addition, he can go to the bank to get financing if he needs it in the
future because all of his assets would now be free and clear. And the
remaining £50,000? Perhaps a new tractor for the farm, or a new car for
the spouse?
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