| What's the FreeSpirit Solution? |
It is the opportunity to roll your ESOPs into cash while continuing to participate in your stock with a Structured Securities Loan
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A Structured Securities Loan can be used to help
employees take advantage of their stock option program by advancing the
amount needed to convert their options into stock and then sending them
the proceeds of the ensuing Structured Securities Loan, all packaged within the same
structure with the option owner's consent.
By
rolling their options into Structured Securities Loan stock loans immediately, there’s
no advance exercise cost to the borrower (no out-of-pocket expense) as
costs are deducted from the loan proceeds. As always, exercising the
option gives the issuer a cash infusion which can be use for any legal
purpose other than the repurchase of marginable securities.
In
addition to tapping the full value of the exercised options as a
nonrecourse/limited-recourse Structured Securities Loan, the client's retains
participation in the upside growth of his portfolio over the term.
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| Behind the Numbers:
Example:
- John
Shareholder owns 100,000 stock options exercisable @ £1 per share. The
stock trades at £3/share. John wants to exercise but doesn't have £100,000 readily available.
- Freespirit facilitates an advance to cover the £100,000, and a loan against the £300,000 portfolio that results - all at once.
- At an 85% advance rate, the loan would be £255,000, minus the £100,000 advanced.
Therefore,
John receives £155,000 (the cash difference) and the loan now leverages
the full 100,000-share position (presumably with a market value of £300K at inception) and he participates in all or some of the upside growth – all without
writing a check.
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