Compensating_Balance_Structures_Collateral_Finance

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					Compensating Balance Structured Collateral
           Finance Strategy




           i Cap Ventures, Inc.
           www.iCapVentures.com
             Irvine, CA    Miami, FL
          Secures                          Invests in
                                           Bank CD’s
                                               for
                                           Guaranteed
                                              Yield

                    Collateral Depositor
                     QIB or High Worth
                          Investor



                                                         Lending Bank or
                                                          Syndication of
                                                             Banks

                    10 Yr Loan to
                      Borrower
                    Interest Cost
                      is tied to
                     CD Spread



It is pre-arranged that the Bank agrees to make Client
Company Loan in a like amount as the Deposit. The
Deposit is not collateral for the Loan. Acceptable
Collateral is acquired from the Loan to secure Loan.
                                  Secures Required Portfolio of Benficial
                                   Interest in Death Benefit of Life Ins.
                                     Policies of People 70+ Years Old



  Benficial Interest
Transferred Into Trust




       GIC
      TRUST
                         10-Yr Term Certain Re-Insurance Guarantee Added




                                   Collateral Instruments &
                               Guarantees Secured – GIC Formed
     The Collateral Investor’s CD’s Allow for a            Compensating Balance
  Compensating Balance for this Financing Structure           to GIC Lending
                                                             Package Arranged


   $32.8M Cash
                      Depositor                                   Collateral is Registered
     Deposit
                                                                  in UCC Filings Against
                                       $32.8M                      Borrower and the GIC
                       Lending
                        Bank            CD’s        Optional
                                                  Equity Kicker
                                                                           $5.7M
                                                   Incentives
                                                                      2-Yrs Pre-Paid Int.
                                                                       Reserve Account



Beneficial Interest                  Loan Payments                         $17.1M
GIC                                                                     Collateralized
                                           10 Yr Loan to               Guarantee (GIC)
                                             Borrower                      & Fees
                       $32.8M
                                           Interest Cost
                      Corporate
                                             is tied to
                        Loan                                                $10M
                                           CD’s Spread                Net Cash Infusion
                                                                        to Borrower
                                                                      Operating Account
$32.8M Face Value
                  Re-Insurance Guarantee to Pay 100% of
GIC               Life Insurance Benefits in 10-Year Term


                         Life Insurance Policies Which Transfer
                         Beneficiary Interest to GIC




                     GIC Transfers
                     Beneficary Interest to
                     Bank for Loan Collateral



  How Guaranteed Insurance
 Contracts (GIC,s) Are Applied                  Lending Bank
                                                or Syndication
                                                   of Banks
      Declining Loan Balance as GIC Policies Mature

GIC                                                       Declining Loan
                                                             Balance
                                    Beginning Balance     $ 32,800,000
              Insured
                                           -$5,000,000    $ 27,800,000
              Dies 1 Yr
                                           -$2,500,000    $ 25,300,000
            $1,000,000
             $5,000,000



             $500,000
             $2,500,000                  As Insured Die
                                         Policys Pay to   Lending Bank
           Insured Dies 18
                                          Beneficiary     or Syndication
               Months                                        of Banks




                  At End of Term Re-insurance
                  Pays all Policies that have not
                  Matured – 100% Guaranteed
                                    50% of Loan
           Venture                                         Lending Bank
            Project                                        or Syndication
           Borrower                                           of Banks
                               = 110% of Project Cost
         Maintains GIC
      Premium Payments
      or comes from early   Pre-Pays 2-Yrs Interest Only
         Maturity of GIC

                              Pays Yrs 3-10 Interest on
                              Net Loan from Cash Flow
                                    50% of Loan
GIC

                              = 100% of Collateral Cost
                               Collateral Value = 100%
                                       of Loan



                                 Pays 100% Loan Remaining Balance
                                    Lending Bank
► Receives Cash Deposit from 3rd party Investor or QIB (arranged by iCapVentures),
purchasing a $32.8M 10Yr CD’s from the Lending Bank.

► Bank then loans a compensating amount ($32.8M) to Borrower for a 10-Year Term - receives
2-Yrs pre-paid Interest, and fully compensating collateral of Re-insured Guaranteed Insurance
Contracts (GIC) with a face maturity value of $32.8M AA-rated and term 100% guaranteed by
re-insurance. Lending Bank is the Beneficiary of the GIC.

► Bank receives interest only payments from Borrower on the Net Loan for years 3 – 10. Yrs
1 & 2 are pre-paid from Loan proceeds on the front end.

► Bank may also take a 1st (or subordinate to any existing lender secured) position on the
Assets Borrower acquires with the Net Capital.

► Borrower also agrees to use the Lending Bank as the depository for all banking trans-
actions for the Borrower business.

► The GIC matures at various stages during the Term to the benefit of Bank (beneficiary of
GIC) and pays down the Principal in tranches as GIC has maturity events, and any remaining
balance is 100% guaranteed and paid at the end of term by the AA-rated re-insurance contract.
This provides 100% guaranteed return of Principal and a certain however variable IRR.
                                Lending Bank (Cont.)

► Bank also receives an Equity kicker or additional ROI from the cash flows of the business.
This additional return is applied against the Borrower Loan Interest cost it ties to the CD. Any
off-setting interest deficit is paid to the Bank by borrower from the business or enterprise Cash
Flows. Principal is 100% guaranteed and paid to the Bank from the maturity of the GIC, and
additionally secured by the assets acquired by Borrower.


► Lending Bank is incentivised to do this type transaction as the will be able to demonstrate:

   ●   Minimization of Credit & Reserve Exposure
   ●   Quality Loans on its Books
   ●   Growth of Customer Deposits
   ●   Reduction in Probability of Problem Assets
   ●   Exploits A Unique Market Position
                        Collateral Depositor (QIB)


► Invests $32.8M with the Lending Bank for the purchase of 10-Yr CD’s at prevailing rates
for a guaranteed yield.


► CD’s are never at risk, as their is no connection between the CD’s and the Loan to
Borrower. The transaction is solely for the purpose of creating a Compensating Balance.


► Depositor additionally gains from Equity Kicker or additional interest negoiated with
Borrower. An investment with no down-side, only up-side potential.
                                      Borrower

► Receives a 100% securitized Loan


► No payments for initial 24 Months – Interest payments are financed for this period


► Pays interest only at a low rate of the spread between the CD and Loan


► Borrower never pays back the Principal of the Loan, as the maturity of the GIC in
  10-yrs pays the Bank (the beneficiary) 100% of the Principal of the Loan


► If development project is able to pay off the principal of the Loan earlier than the 10-Yr
Term, the beneficial interest in the GIC is transferred from the Lending Bank to the benefit
of the Borrower. GIC can be sold and cashed out early, or flipped to the next transaction of
Borrower as the structured collateral instrument (which now has a shorter maturity
guarantee, i.e., if in 5-years, the Principal return can be 100% guaranteed in 5-Yrs).
                                   iCapVentures


► In cooperation with Borrower, secures Depositor and assists in negotiating favorable
terms and conditions of the transaction as described above.


► In cooperation with Borrower, secures Lending Bank for transaction on the basis of the
structure described herein.


► Provides GIC Trust collateral instruments and documentation


► Resources Life Settlement collaterals to the criteria of Re-insurer (see further information
on this below). 1 to 1 up to 1 to 1.2+ coverage.


► Resources Re-insurance wrap for a 10-Year fixed date certain – 100% guaranteed pay-off
of the balance of Principal Loan and any remaining Interest.
Compensating Balance Structured Collateral
           Finance Strategy




             Irvine, CA  Miami, FL
                   Jim Nash
           jrnash@iCapVentures.com

				
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posted:11/10/2011
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