7. Benefits of Securities Lending Loans are “Non-Purpose” – loan can be used for virtually anything borrower wants to accomplish (personal or business) Loans are “Non-Recourse” – giving the borrower the opportunity to simply “walk away” if the collateral falls below a set floor amount High Loan-to-Values – up to 80% LTV(depending upon security); which is much higher than banks and brokerage companies can offer Interest Only Payments – principal payment at maturity; otherwise loans can be refinanced or extended Low Fixed Interest Rates – usually between 2% to 4% Flexible Loan Terms – minimum of 3 years; may be as long as 10 years Borrower Retains Beneficial Ownership of Securities Borrower Receives ALL Dividends & ALL Appreciation
8. What is a Securities Loan? Borrowers use their stocks & other securities to obtain loans for personal or business purposes. Q: “Is stock the only asset I can use as collateral for a securities based loan?” A: NO – In additional to stocks, ICON also works with individual investors who have other types of investment assets, such as mutual funds, exchange trade funds (EFTs), bonds, or U.S. Treasuries. We assess each client’s desired collateral on a case-by-case basis – please contact us to determine if your assets meet our requirements.
9. Funding Criteria – What Works Securities must be Publicly & Actively Traded Acceptable Securities Include – Stocks Mutual Funds Bonds U.S. Treasury Notes Most Foreign Securities
10. Funding Criteria – What Doesn’t Work Instruments NOT Usable as Collateral include – CD’s* Money Market Accounts* Annuities SBLC’s Bank Guarantees or Warranties Commodities CMO’s Gold or Silver Mines Precious Stones Bearer Bonds* Private Notes or Private Bonds Maturing Bonds (coming due within 3 years) 401(k)’s, IRA’s or any Restricted Retirement Funds * CD’s, Money Market Accounts & Bearer Bonds may be converted to cash; then acceptable securities may be purchased and used as collateral.
11. Why Choose ICON? ICON Commercial Lending is a trusted authority for Stock Loans. ICON is a Full-Service Securities Lender with a proven track record in providing world-class customer service to their clients. Securities Lending is a long-established process – hundreds of successful stock-lending transactions which have been executed involving the American Stock Exchange (AMEX), National Stock Market and Small Cap Stock Market (NASDAQ), New York Stock Exchange (NYSE), Over-the-Counter Bulletin Board (OTCBB), and certain foreign exchanges. Forward-thinking investor who wants to retain the future ownership of your assets as well as leverage the present value of your securities for immediate cash needs, this can utilize ICON’s terrific securities lending program. Securities lending offers loans that are both non-purpose & non-recourse and can be used for any business or personal use.
12. ICON's Commitment to You ICON is committed to provide you the professional services you need to quickly achieve your financing needs – To that end, ICON promises to manage your business affairs in the fashion you expect. ICON provides you with: Honesty & Personal Attention - ICON is committed to carrying out each step of the funding using a straightforward process. There will be NO Surprises, NO Delays and NO Last Minute Changes. Giving you ALL the facts up front, working with you one-on-one, having the flexibility to meet your needs, and providing clear and constant communication are fundamental to how we service each client.
13. ICON's Approach to Business ICON offers you an experience that is truly unique in today's volatile capital markets with a wide range of lending terms & options for the acquisition or refinancing of all types commercial & residential real estate or any general business or personal use. ICON is committed to provide the securities lending industry's most straight-forward, personal, and customized solutions to investors in need of prompt funding. ICON provides quick response in today's demanding marketplace. ICON promises to provide you - A proven and straightforward process built around your needs. What you want is what you get! We understand that you’re a forward-thinking investor who wants to retain the future ownership of your assets. But you also want to leverage the present value of your securities for your immediate cash needs. ICON approaches getting to a funding solution for you in the same straightforward way. Every step in our process is clearly spelled out, giving you complete control. Our proven and efficient process streamlines loan paperwork — as well as asset & fund transfers — for a rapid and trouble-free experience.
14. EXAMPLES of Closed Stock Loans Collateral: 10 Year US Treasury Notes Loan Amount: $8,000,000 LTV: 80% Interest Rate: 3.25% Loan Term: 3 Years Use of Funds: Purchase Commercial Property Collateral: Stock Portfolio Loan Amount: $2,745,000 LTV: 70% Interest Rate: 3.5% Term: 3 year Use of Funds: Personal Use Collateral: Common Stock Owned by Corporate Officer Loan Amount: $24,300,000 LTV: 65% Interest Rate: 4% Loan Term: 3 years Use of Funds: Personal Use Collateral: Berkshire Hathaway Stock Loan Amount: $8,650,000 LTV: 78% Interest Rate: 2.85% Term: 3 year Use of Funds: Commercial Development Collateral: Yahoo Stock Loan Amount: $1,870,000 LTV: 77% Interest Rate: 3.5% Term: 3 year Use of Funds: Personal Use Collateral: Exchange Traded Fund (ETF) Otherwise known as SPR (Spider) Loan Amount: $5,390,000 LTV: 70% Interest Rate: 4% Loan Term: 5 years Use of Funds: Retire Commercial Building Loan
15. Comparing Margin Loans vs. Securities Based Lending What’s the difference in just going to your brokerage house and obtaining a "margin loan" instead of utilizing ICON's lending program? 1. Typical Margin Loan – FULL Recourse loans — additional liability, fees, and penalties may be assessed. 2. Typical Margin Loan – For many brokerage houses, a credit requirement has been added as a qualifying factor. 3. Typical Margin Loan – 50% LTV ratio 4. Typical Margin Loan – Variable higher interest rates (typically 5% to 8% ARM's) 5. Typical Margin Loan – Not all NASDAQ, AMEX, NYSE stocks are “marginable.” 6. Typical Margin Loan – are not allowed to lend on stocks valued at less than $10.00 per share. 7. Typical Margin Loan - If the share price drops below 75 percent to 80 percent of original total stock value, a margin call is initiated and may you normally have only one day to cure the default, which may result in the unwanted sale of your securities. ICON's Securities Loans have significant advantages over conventional margin loans. 1. ICON Securities Loans are 100% NON Recourse with NO personal liability; you may walk away from an ICON loan with no penalties & NO negative credit reporting. 2. ICON does NOT check your credit nor income. 3. ICON Securities Loan are up to 80% LTV; depending upon securities’ trading volume and liquidity. 4. ICON Securities Loans have a fixed lower interest rates from 2% to 5% 5. ICON Securities Loans are available against all types of securities that qualify (including OTC:BB, “pink sheets”, and certain foreign exchanges). 6. ICON offers the loan on any share price. 7. ICON has a flexible process to “cure” your loan default. ICON’s "call" is set at 80% of the loan amount (approximately 65% of the stock value) and we offer 5 days to cure the default instead of only one day. Since ICON’s loans are non-recourse loans, if the borrower cannot cure the loan default they may simply walk away.
16. What is ICON’s Loan Process? We work with you at the pace you set, making your loan experience easy, fast, straightforward, and hassle-free. Here are the simple steps: 1. Contact ICON with complete details about the proposed collateral and the amount of non-purpose funding needed. 2. Provide proof of ownership of your securities, bonds, or options with either electronic or physical certificate documents. You must also be able to demonstrate that any security is free-trading and without restriction. Restricted securities to be reviewed on a case-by-case basis. 3. ICON will first determine the viability of the loan and then calculate a loan-to-value (LTV) ratio and the fixed interest rate, based on an assessment of both short-term & long-term risks. 4. You agree to terms, sign all contracts, arrange for your assets to be transferred. The loan is funded and you make quarterly fixed interest-only payments. 5. At the end of the loan term, you repay the loan. Once your loan is repaid in full, we return the same amount of identical collateral to you.
17. How Long Does ICON’s Process Take? Normally, the process takes about 7 to 10 days for your loan to be funded, although funds can be deposited into your account as quickly as 3 to 5 days providing that all documentation of the proof of asset ownership is supplied promptly, contracts are signed, and transfers take place in a timely manner,. Depending upon the urgency of your situation and your individual needs which may requires more immediate attention, such as a margin call or a business deal with a pressing deadline, ICON will work with you to expedite or "fast track" the process.
18. What Happens at the End of the Loan? You pay the loan back, then we give you back the same number of shares you’ve pledged as collateral. However, depending on what your financial needs are at the time and how your collateral has performed during that period, there are a few other options: 1. You can extend the term of the loan upon mutually agreed terms. 2. In the event of portfolio growth, upon mutually agreed terms, you can refinance the loan at the end of the term. 3. In the event of substantial decline in market value of your collateral, you can simply walk away from the loan with no additional expense because it is a non-recourse loan.
19. What if My Collateral Incurs a Substantial Drop in Value? If the value of your securities falls below 80% of the loan amount – (For example, if you had $10M in U.S. treasuries with a loan amount of $8M and the value of the treasuries fell below $6.4M, which is 80% of the original loan amount) You have two options: 1. Since the loan is 100% non-recourse, you may terminate the loan without having to pay off the principle or incur a penalty, or 2. Keep the loan current by tendering additional shares or cash.
20. How is a “Strike Price” used to Determine a Loan Value? Before a loan can be funded, a “Strike Price” (the per-share price that the value of the collateral will be based on) must be set. To be the fairest to everyone, a fair and equitable three-day (3-day) average pricing model is used for every securities based loan we transact. The strike price is based on an average of the closing prices of the collateral for 3 consecutive market days, beginning with the first day it is transferred.
21. Who Owns (or Has Title)to my Stock During the Loan? The stock is transferred to a holding company which has full title, but the borrower retains all beneficial ownership & interests in the securities. The borrower will receive any dividends, interest or any other benefits that flow from the stock during the term of the loan.
22. Am I Personally Liable for this Loan? NO, this is a “non-recourse loan”; therefore, ICON cannot come after you personally. There is no personal liability associated with this type of loan. The only security for the loan is the stock and the only recourse ICON has is against that stock. The borrower has no personal liability exposure and is not obligated. However, if your company chooses to back-you-up and make the payments, that’s up to you.
23. Is the transfer of the stock for a loan considered a "sale"? Are there taxes associated with the transfer of the stock? No, this is not a taxable transfer. This type of transaction is specifically addressed in IRS Code § 1058 which specifically states that taxpayers who enter into a qualifying stock lending agreement receive non-recognition treatment with respect to any gain or loss at the time of the transfer of the securities. This section provides an exception to the general income recognition principles of Section 1001 of the Internal Revenue Code. This is a common transaction in the financial markets.