Non Transfer of Title Stock Loans to Raise Capital
Non-transfer of title stock loans provide the most efficient and practical solution to the stock owner for raising immediate capital. A stock loan participant is able to access a majority of the current value of his/her underlying securities position while retaining access to the securities and the potential for future growth.
- A stock loan gives liquidity to the borrower.
- A stock loan provides a hedge against market volatility to the borrower.
- A stock loan is a simple, interest-only loan vehicle.
A stock loan is a simple and effective transaction designed to provide the borrower with liquidity while retaining access to potential asset appreciation. There are different variations of the stock loan vehicle across the globe, but the underlying model is primarily the same:
- The client requests loan terms from the Lender.
- The Lender analyses the collateral and provides a term sheet.
- The client reviews the terms and then signs the document.
- The Lender issues a loan contract.
- The client signs the contract and deposits the collateral in his/her brokerage account designated in the loan agreement.
The Lender transfers the loan proceeds via an internal Delivery Versus Payment (DVP) directly to the client’s account.
The client makes quarterly interest payments until repayment of the loan and the repatriation of the securities.
In some countries, the only type of stock loan financing available is the margin loan. In other more developed regions, margin loans and private, non-recourse stock loan financing competes to provide liquidity to borrowers.
Consumers in Europe and Asia are more accustomed to non-recourse stock loans (sometimes referred to as share financing, or stock secured loans). Oceanview provides a superior stock loan solution for Asian and Chinese consumers in need of affordable and safe liquidity. Across these regions, OVCP loan-to-values and interest rates beat the majority of the competition every time.
The typical loan-to-value for such transactions ranges from 40% – 65%, with margin calls and no type of recourse. Interest rates very between 3% and 6%.
A number of our stock loan clients elect to borrow against a portion of their total share holdings as a hedge against another global market downturn. Other clients with concentrated positions in a single security will choose to borrow against their securities as a basic asset hedge.
Shareholder Hedging Strategies
Current and former executives of public companies are usually in possession of concentrated positions of a single security. In order to pursue the generally accepted principle of diversification, the executive is forced to sell some portion of the position in order to purchase other assets. Oceanview can provide an alternative path to diversification in the form of a stock loan.
A stock loan allows executives to borrow against a minority stake of their holdings and use the proceeds to invest in alternative assets like real estate, private placements, new business ventures, etc. The executive hedging strategy allows the client to remain exposed to the upside potential of the concentrated security position while at the same time releasing liquidity for alternative investments.
Executive Officer, Director or Large Shareholder
Affiliates of public companies (executive officer, director, large shareholder) often find themselves in need of capital, but unsure as to how to properly monetize their holdings. Some of the larger global institutions provide minimal liquidity solutions for their clients, but they usually only work with the largest clients associated with blue chip firms.
Oceanview can provide several different financing routes for affiliates of public companies. Whether in the form of a managed equity line, a compliant margin loan or a purchase of restricted stock, Oceanview will meet your financing needs.
Talk to us to find out how you can turn your stock into cash.