Shenzhen

SECURITIES-BASED FINANCING 中國股票貸款

LOAN AMOUNTS FROM USD 5MM TO $500MM+

Lending Area: International (most countries)



UPDATE 2019-05-04
CHINA STOCK LOANS

WE ARE ACCEPTING CHINA STOCK LOAN REQUESTS AGAIN

CONDITIONS:
Option 1: China stocks should be listed on HK Stock Connect, or
Option 2: we would need to get QFII quota which is a derivative product to give China access but shares stay in China (If there is big volume like USD 20MM or more then we can apply but it's a long process).

Hong Kong Stock Exchange

EXCHANGE-TRADED SECURITIES LOANS (STOCK LOANS)

FROM USD 5 MILLION

Is your firm a listed public stock company or are you a common stock or bond investor and need access to inexpensive and secure financing? Securities-based financing is a low cost option to consider for any reason.


Common stock financing are securities-based loans where the terms of the loan are governed by a "Securities Lending Agreement," also know as the Control Agreement, which requires that the borrower provide the lender with collateral, in the form of exchange-traded stocks (common, preferred, or convertible stock), or other securities, of value greater than the loan amount.



FUNDING AVAILABLE AS:

  1. a loan secured by the stock (Stock Loan)
  2. a loan but stock transfers to lender during the term of the loan and borrower has option to buy back the stock (REPO)
  3. a sale of the stock at a discount (Block Sale)



RETENTION OF OWNERSHIP

In most countries, borrower retains ownership of the common stock that is held in borrower's own brokerage account and borrower continues to enjoy dividends and capital appreciation of the stock during the term of the stock loan. In countries that implement strict capital controls** against their citizens and businesses, title of the stock may need to be transferred to the lender during the term of the loan; title to the shares is vested back to borrower upon repayment of the loan.


Tokyo Stock Exchange

EXCHANGE-TRADED STOCK LOAN OVERVIEW

- Approvals: within 24 hours, or less.

- Arranger Fee: paid at closing.

- Collateral: public exchange traded stock, freely traded, and unrestricted.

- Currency: USD, EUR, HKD, others considered

- Funding Available: stock loan, REPO, Block Sale, bond Loan backed by stock.

- Interest Rate: range from 0% to 9% (see below for 0% INTEREST RATE, EXAMPLE)

(determined by stock liquidity, volatility, the loan currency, and other risk factors).

- Lender: investment groups, high net worth individuals, & endowments.

- Loan-to-Value (LTV): 40%-75%.

London Stock Exchange

- Loan Amount: from USD $5 million to $500 million plus (US OTC $1MM+)

- Loan Proceeds: available worldwide.

- Lock-In Period: 12 to 36 months.

- Maturity Date / Loan Term: 12 to 120 months.

- Payments: interest only.

- Processing Time: 10 trading days depending on the speed borrower processes the paperwork.

- Recourse: limited recourse (i.e. stock is the only collateral)

Title Transfer: No title transfer (and stock is not traded) in most cases unless the exchange country has excessively restrictive capital controls.


LOAN APPROVAL (ALL STOCK LOANS)

Please Provide: (email here)

1) Stock company/symbol (i.e. ticker or #)

2) Country/exchange traded

3) Loan amount AND # shares available to pledge

(include broker account statement, if available)​

4) Shareholder name AND address for term sheet

5) Transfer of title or not

6) Use of loan proceeds




NEEDED WHEN TERM SHEET IS RETURNED

7) Name of current custodian of shares AND holding bank/broker-dealer

Re: #3, statement can be returned with signed term sheet; be certain of exact # of shares available to pledge


UPDATE: 2018-05-27

INDIA, due to increased capital controls implemented by the Royal Bank of India (RBI), India stock loans are still possible but as bond loans (i.e. bond backed by India common stock). See Corporate Financing.



Shenzhen Stock Exchange

CHINA

IDEAL CRITERIA FOR FUNDING EXCHANGE-TRADED STOCKS

Liquid Assets (loan amount can be repaid within 5 days using daily trading volume on the stock exchange)
- Market capitalization at least USD 110 million.
- Volatility less than 80
- Daily turnover at least USD 520,000


Illiquid Assets (loan amount cannot be repaid within 5 days by means of the daily turnover of the security)
- Market capitalization at least USD 500 million.
- Credit must be repaid within 10 days by means of daily turnover.
- Guarantee from private individual; if the borrower is a company, the BO (beneficial owner) shall be liable.
- An in-depth analysis of the title will be carried out.

We also look at each stock individually. If a company has a solid background and good business, funding is still considered.


---------------------------------------------------------------------------------------------------------------------------------------

Financing Available On Most Stock Exchanges

0% INTEREST RATE

EXAMPLE: EXCHANGE-TRADED STOCK LOAN

LTV 55% (maximum)

Gross loan amount: USD 100 million

LESS investment amount: USD 15 million (i.e. fixed income A-rated securities)

Net loan amount: USD 85 million

Loan term: 24 to 36 months

Loan interest: paid by lender (effective interest rate to borrower is 0%), and

borrower participates 50-50 in profits on the investment with the lender.



Benefits to borrower:

- no interest cost for the entire loan term

- lower loan costs

- additional revenue/profits from the investment


--------------------------------------------------------------------------------------------------------------------------------

** CAPITAL CONTROLS (i.e. especially exchange controls and limits on outflows from portfolio investments)

Gochoco-Bautista, Jongwanich, and Lee (2010, p. 16-17) say "The findings imply that capital outflows actually increase when countries impose restrictions to try and prevent capital outflows" and when "a country restricts capital outflows, it is sending a signal to market participants that it is worried about loss of confidence and the possibility of capital flight and financial instability, and may signal difficulties in repatriating profits, any of which could precipitate capital outflows." When a country implements capital controls, the policies put into place are determined through the analysis of benefits and costs (i.e. benefits to the government not the citizens and businesses, and costs are ultimately paid by the taxpayer) (Country Policies, 2000, p. 41). Countries with capital controls: Argentina, Brazil, Cambodia, China, Chile, Cyprus, Germany, Iceland, India, Indonesia, Ireland, Japan, Malaysia, Romania, Russia, South Korea, Spain, Taiwan, Thailand, Turkey, Venezuela, Vietnam, ...


AFFECT ON CITIZENS/BUSINESSES & SOLUTIONS

Capital controls result in citizens losing control of their wealth in favor of their government, and losing the freedom to enjoy their wealth as they wish. To maintain control of wealth and earnings, citizens and businesses of these countries must move their capital abroad, start earning abroad, and not bring the funds back into the restricting country. Suggested countries to hold assets are Hong Kong, Singapore, and Switzerland.


References:

Gochoco-Bautista, Maria Socorro; Jongwanich, Juthathip; Lee, Jong-Wha (October 2010). How Effective are Capital Controls in Asia? ADB Economics Working Paper Series, No 224. Retrieved from https://www.adb.org/sites/default/files/publication/28426/economics-wp224.pdf


“Country Experiences with Their Use and Liberalization IMF Occasional Paper 190.” International Monetary Fund (IMF), 17 May 2000, Retrieved from

http://www.imf.org/external/pubs/ft/op/op190/pdf/part1.pdf