From the desk of Roel Hoekstra January, 2007
A new year is always exciting. I suppose everyone who writes an article or a newsletter sits down in
January to ponder what happened last year and set goals for the year to come. Well, I’m no different.
2006 was a great year for our organization and our partners. We added a new product, the STAR
loan, and it is a huge hit. High LTV stock loan with no margin calls, full upside appreciation to the
borrower and no prepayment penalty or restrictions. This is everything a margin loan is only better!
We also worked through the 4th quarter on a large project to use our CAPPED stock loan as the
foundation for a low cost, no margin call, full upside loan that is part of a larger corporate finance
project. We hope to have this deal closed soon and we are extremely excited about this new
application for our CAPPED loan in the world of corporate finance. Hard work, real creativity, thought
leadership and professionalism from all the participants in this deal have led to a real breakthrough.
I’ve written more about how this works below.
I have also completed the first draft of a comprehensive buyer’s guide to stock loans. It's posted on
our web site and you will find the link below. If you take the time to read it I would sincerely appreciate
any feedback.
So, to summarize, this newsletter covers;
• Using our stock loan programs as a low cost corporate finance tool
• The new “Stock Lending Buyer’s Guide”
Using our stock loan programs as a low cost corporate finance tool
One of our investment banking partners came to me with a great opportunity and challenge; how to
use our stock loan programs to re-finance a high interest rate loan.
The company had a major shareholder who was willing to put up his shares as collateral for a loan.
The challenge was how to minimize the shareholder’s risk while retaining all rights to future capital
appreciation. Plus we had to keep the effective interest rate below 7% (inclusive of all fees) in order
to make the new loan worth the effort of re-financing the old loan.
So, no risk to the shareholder, full upside on the stocks and interest rates including all fees (even the
investment banking fees) under 7%, now that is a challenge.
How we did it.
We used our CAPPED loan which carries a 90% LTV (with no margin calls) and brought the share
cap down as low as possible. For the three year term this loan has an upside cap of 121%. The low
cap allowed us to generate a rate of just over 6% per year including all fees and points.
Then when the shareholder lends the cash back to the company, in addition to marking up the
interest rate slightly, the company is issuing stock warrants priced at the cap (121% of the existing
stock price).
This created a great win/win for everyone. The company gets sub prime financing and only has to
issue “out of the money” warrants. The shareholder gets a no margin call, non recourse loan to fund
his loan which generates current cash flow and with the warrants, retains unlimited capital
appreciation.
“Stock Loan Buyer’s Guide”
After leading the development of the stock lending industry for the past nine years, we have stumbled
across most of the common problems and misconceptions about how to negotiate and structure
effective stock loans. So, with a little free time over the holidays we decided to put together a
comprehensive buyer’s guide.
Click here to open our Stock Loan Buyer's Guide
Our buyer’s guide covers
• What is stock lending?
o retail
o institutional
• What to look for in a deal?
o LTV
o interest rates
o points
o prepayment options
o margin calls
o upside caps
• The closing process
o Term Sheet
o Application
o Loan documents
o Share transfer
o Deal funding
• Understanding what happens to your stock while the loan is outstanding
o Lender’s concerns
o Hedging strategies (active and passive)
Loan payoff
• Due diligence issues and concerns
o Will I get paid after transferring stock?
o Are my shares safe?
o Will I get my shares back when I pay off the loan?
Follow-up and contact information
I would be delighted to talk with you about your stock loan needs any time. Give me a call at
215.858.8659 or send an email to Roel@globalstocklending.com.
Regards,
Roel Hoekstra
Managing Partner
www.globalstocklending.com
Philadelphia, PA
215.858.8659 phone
215.827.5414 fax
A new year is always exciting. I suppose everyone who writes an article or a newsletter sits down in
January to ponder what happened last year and set goals for the year to come. Well, I’m no different.
2006 was a great year for our organization and our partners. We added a new product, the STAR
loan, and it is a huge hit. High LTV stock loan with no margin calls, full upside appreciation to the
borrower and no prepayment penalty or restrictions. This is everything a margin loan is only better!
We also worked through the 4th quarter on a large project to use our CAPPED stock loan as the
foundation for a low cost, no margin call, full upside loan that is part of a larger corporate finance
project. We hope to have this deal closed soon and we are extremely excited about this new
application for our CAPPED loan in the world of corporate finance. Hard work, real creativity, thought
leadership and professionalism from all the participants in this deal have led to a real breakthrough.
I’ve written more about how this works below.
I have also completed the first draft of a comprehensive buyer’s guide to stock loans. It's posted on
our web site and you will find the link below. If you take the time to read it I would sincerely appreciate
any feedback.
So, to summarize, this newsletter covers;
• Using our stock loan programs as a low cost corporate finance tool
• The new “Stock Lending Buyer’s Guide”
Using our stock loan programs as a low cost corporate finance tool
One of our investment banking partners came to me with a great opportunity and challenge; how to
use our stock loan programs to re-finance a high interest rate loan.
The company had a major shareholder who was willing to put up his shares as collateral for a loan.
The challenge was how to minimize the shareholder’s risk while retaining all rights to future capital
appreciation. Plus we had to keep the effective interest rate below 7% (inclusive of all fees) in order
to make the new loan worth the effort of re-financing the old loan.
So, no risk to the shareholder, full upside on the stocks and interest rates including all fees (even the
investment banking fees) under 7%, now that is a challenge.
How we did it.
We used our CAPPED loan which carries a 90% LTV (with no margin calls) and brought the share
cap down as low as possible. For the three year term this loan has an upside cap of 121%. The low
cap allowed us to generate a rate of just over 6% per year including all fees and points.
Then when the shareholder lends the cash back to the company, in addition to marking up the
interest rate slightly, the company is issuing stock warrants priced at the cap (121% of the existing
stock price).
This created a great win/win for everyone. The company gets sub prime financing and only has to
issue “out of the money” warrants. The shareholder gets a no margin call, non recourse loan to fund
his loan which generates current cash flow and with the warrants, retains unlimited capital
appreciation.
“Stock Loan Buyer’s Guide”
After leading the development of the stock lending industry for the past nine years, we have stumbled
across most of the common problems and misconceptions about how to negotiate and structure
effective stock loans. So, with a little free time over the holidays we decided to put together a
comprehensive buyer’s guide.
Click here to open our Stock Loan Buyer's Guide
Our buyer’s guide covers
• What is stock lending?
o retail
o institutional
• What to look for in a deal?
o LTV
o interest rates
o points
o prepayment options
o margin calls
o upside caps
• The closing process
o Term Sheet
o Application
o Loan documents
o Share transfer
o Deal funding
• Understanding what happens to your stock while the loan is outstanding
o Lender’s concerns
o Hedging strategies (active and passive)
Loan payoff
• Due diligence issues and concerns
o Will I get paid after transferring stock?
o Are my shares safe?
o Will I get my shares back when I pay off the loan?
Follow-up and contact information
I would be delighted to talk with you about your stock loan needs any time. Give me a call at
215.858.8659 or send an email to Roel@globalstocklending.com.
Regards,
Roel Hoekstra
Managing Partner
www.globalstocklending.com
Philadelphia, PA
215.858.8659 phone
215.827.5414 fax