A fully operative "AA-" Bank Guarantee can be provided to approved clients as follows:
Minimum BG Amount: $15,000,000 (denominated in USD only)
Term: 5 years only - renewable for an additional 5 year
Issuing Bank: A North American international bank with an S&P rating of "AA-" (Moody's: "Aa2") and which is ranked by The Bankers' Almanac within the World's largest 100 banks.
Receiving Bank: The Receiving Bank will ultimately be responsible to the Guarantor in respect of the management of the funding and recovery of any assets in the event of a project failure. Accordingly, the Guarantor will require the Receiving Bank to be a well-rated bank within a politically and economically stable area.
Qualifying Projects: A marked preference is displayed for proposals involving the development of land, especially large-scale commercial, infra-structure and civil engineering projects in which the client company has an equity interest of approximately 75%. Other proposals will be considered but they must have an identifiable end product with a ready market and easily assessed market value. Priority will be given to projects in North America and Western Europe . Applications from any country with a history of debt default will be declined.
Total Fee: 25% (The fee is payable at issue and covers the full term of the BG. It is possible to borrow the Issue Fee from the Receiving Bank. If this course is taken, the Guarantor reserves the right to levy a surcharge on the Issue Fee). There are 2 "25%" factors in the transaction.
The first is the suggested equity that the client has in the transaction. For example, if he is constructing a housing development for $25,000,000, the BG company would like to see the client have his own funds of about $6,250,000 in the deal. It's very similar to a lender who makes a maximum loan of 75%. The second 25% factor is the fee for the BG. If the client does not presently have 25% in cash or only a portion of it, the BG company will consider allowing the client to deduct the 25% fee from the loan secured with the BG. Another possibility is to get the BG for 85% of the value of the project, if the borrowing entity is creditworthy and has a long track record of success in the same industry.
Documentation and Procedure: Initially we will require a brief summary of the project plus a simple year-on-year cash-flow forecast.
It is important that the summary identifies the present net asset value of the Applicant, the present project net value, the 5-year project cost structure and the final market value. It must also identify the intended Receiving Bank and the present level of bank funding available.
If the project is approved for the operative BG, it is recommended that a special purpose corporation be formed to facilitate the transaction.
It is the sole responsibility of the client to provide an acceptable bank to receive and fund the operative BG. However, ABC can assist the client in doing so for an additional fee.
Interested parties are requested to submit a brief project summary (2 pages maximum) and a pro-forma based on an operative BG in an amount equal to 25% of the project cost.
CREDIT ENHANCED LOANS FOR REAL ESTATE
The lender is a recognized U.S. based commercial mortgage and investment banking firm providing debt and equity capital worldwide. Primarily a commercial real estate lender and correspondent of Wall Street capital, the lender has been providing real estate capital for commercial loans from $3,000,000 to $500,000,000 for over 20 years. In addition, the lender is one of the few commercial mortgage and investment banking firms that can provide unique investment grade credit enhancements to leverage and secure a loan transaction, when such enhancements are necessary to close a loan that would otherwise be rejected.
This lender is currently providing Credit Enhanced Loans for domestic ( USA only) transactions and International Real Estate Loans as described below.
Credit Enhanced Loans: construction and permanent loans for acquisition, development and refinance of domestic real estate, including hotels, golf courses, multi-family, retail, office, mall, mixed use, senior care, assisted living can be arranged using "A" rated letters of credit to wrap the loan package.
Minimum Loan Amount: $5,000,000
Interest Rate: Adjusted monthly based on 30 day LIBOR
(currently 1.09%) + 175-225 basis points.
Based on the current LIBOR rate, the effective rate is
estimated at 2.84% to 3.34%.
Est. Closing Time: 45-60 days
Letter of Credit Enhancement Fee: 1% (100 basis
points) is incorporated into the effective rate.
Loan to Value: 75% - 80%
No Pre-Payment Penalty
The borrower must have significant real estate
experience and a healthy balance sheet.
Typical Terms: 3-5 years with 20 or 25-year
amortization schedules, with two automatic renewals
Loan Fee of 1% is paid at closing.
A Due Diligence / Good Faith Deposit of $25,000 is
collected by the lender upon borrower's execution and
acceptance of a formal Loan Term Sheet, but is
deductible at closing from the Loan Fee of 1%.
Estimates of Other Fees to be paid at Closing:
Legal/Bond Counsel, rating agency fees, LC Counsel and
Trustee Counsel: $50,000
MAI, Engineering and Environmental: $12,000.00
Trustee Bank Fee: $2,500
Rating Maintenance Fee: $2500
Broker Fees: 1%
The LC will be determined by the strength of the
Borrower's credit and financials. The real estate will
be underwritten in the standard formula with DSCR
requirements and Loan To Value /Loan To Cost
considerations etc. The Borrower shall guaranty the LC
for the term of the Loan.
Estimated Borrower Savings: A conventional loan of
$10,000,000 with 25 year amortization @ 5%, including
closing costs requires a monthly mortgage payment of
$59,189.74. A loan of the same amount in this Program
amounts to $47,414.27 monthly, which represents a cost
of finance savings of approximately 19.9%.
Indicated below are some of the lender's recent
transactions.
$43,000,000 - Construction & Permanent Loan: Sheraton
Hotel
$9,200,000 - 1st Mortgage: Golf Course
$2,900,000 - Construction & Permanent Loan: TGI
Fridays Restaurant (North Carolina)
$2,000,000 - Construction & Permanent Loan: TGI
Fridays Restaurant (Massachusetts)
$1,300,000 - 1st Mortgage: TGI Fridays Restaurant
(Maine)
$2,500,000 - Construction & Permanent Loan: TGI
Fridays Restaurant (North Carolina)
$1,300,000 - 1st Mortgage: Super 8 Motel (Louisiana)
$1,500,000 - 1st Mortgage: Super 8 Motel (Louisiana)
$13,000,000 - 1st Mortgage: 690 Apartment Portfolio
(Georgia)
$6,950,000 - Construction & Permanent Loan: Retail
Center
$1,200,000 - 1st Mortgage: Retail Village Center
( Georgia
$4,400,000 - 1st Mortgage: 144 Unit Multi-Family
( Georgia )
$275,000,000 - Forward Commitment: Full Service Hotel
$4,250,000 - Forward Commitment: Assisted Living
Facility
$1,200,000 - 1st Mortgage: Office Building ( Knoxville ,
TN )
$8,000,000 - Forward Commitment: Full Service Hotel
INTERNATIONAL REAL ESTATE LOANS
Construction and permanent loans for acquisition, development and refinance of off-shore and domestic real estate projects including hotels, golf courses, multi-family, retail, office, mall, mixed use, senior care, assisted living can be arranged using investment grade bonds issued by insurance and reinsurance companies as loan security. The cost of this service varies on each transaction but typically ranges from 1% to 3% of the loan amount and is paid at closing.
An annual Enhancement Fee of 1% is paid during the term of the loan.
Minimum Loan Amount: $10,000,000
Loan to Value: 75% - 80%; up to 100% of acceptable
construction costs
Loan Term: 3, 5 and 7 year terms
Interest Rate: 175 - 220 Basis Points over 3 Month
U.S. Treasuries' Rate
Loans are non-recourse
Fees:
a) Due diligence fee of $25,000 is paid directly
to the lender upon borrower's acceptance of term
sheet;
b) Commitment fee of 2% to be paid upon
borrower's acceptance of commitment;
c) Insurance
bond (enhancement) fee of 1% - 3% to be paid at
closing;
d) Lender's fee of 1% to be paid at closing;
e) Consultant's fee of 1% to be paid at closing;
f)
All fees while due and payable at specific times can
be financed in the loan amount.
Closing: Approximately 8 weeks
Project Locations: in politically and financially stable countries only, political risk insurance may be necessary
Interested parties should submit a brief project summary (2 pages maximum) by email attachment. If the summary is favorably reviewed, a comprehensive business plan will be requested.
We have three programs for investors and clients of brokers. These are the ultimate of products that guarantee the investor all of their principal investment and have the chance for huge upside gains without any risk to capital.
The first program involves bonds (AAA government FICO or REFCO) collateral program. The trust will deliver up to one billion dollars of US graded bonds that are stripped to the investor or bank prior to disbursement of loan proceeds. Which makes the lender comfortable in knowing what the security is and the time to do their due diligence.
The second program allows the applicant to obtain a Credit Enhancement, which will enhance their success in obtaining a funding commitment on viable projects that meet the lenders minimum requirements. The following is an overview of the program for obtaining viable funding commitments for various projects around the world:
Most projects can be funded in 45 days, provided the Applicant's submission package proves that the Applicant has a viable project, that can repay the interest on the loan. If this can be accomplished, then the Applicant will get their project funded. It really is that simple!
The Credit Enhancement program is one where a type of "sinking fund" is created for the Applicant so that if they are seeking a loan for their project the entire principal can be guaranteed by the collateral enhancement or bank instrument. This allows the Applicant to borrow the funds needed for their project and pay "interest only" over the 10 year term of the loan. This is accomplished with a "sinking fund" type collateral enhancement, that is a top European Bank guarantee. Definition number one of a Sinking Fund, according to Barron's Dictionary of Banking Terms is: "Money accumulated in a custodial account to retire debt instruments according to a predetermined schedule, regardless of pricing changes in the secondary market. Some Sinking Fund requirements must be satisfied by redemption of a specific amount of the issue during a specific year. In other cases, the Sinking Fund requirement can be met through purchases of the issue in the open market."
This program involves requesting the financial collateral provider enhancement for approximately 60% (the percentage will go up and down as interest rates fluctuate) more than the amount of the project requests. This allows approximately 60% being used as a "sinking fund" account at a rate of return of approximately 5.29% (rate subject to change due to market conditions, but it is 5.29%, as of 05/17/01) yearly compound interest on that account, thus growing to the full principal amount by the end of the 10-year term. The extra 60% borrowed pays the principal on the loan. The Applicant never makes a payment on the principal, the principal is paid by the extra 60% borrowed and placed in the "sinking fund" account. Please do not confuse this with some self-liquidating loan program. This is not a self-liquidating loan program. This is by far on of the most popular programs available to developers today. Programs for governments are also available.
It normally takes 30 to 60 days to close a loan, with the average loan closing in 45 days. If the Applicant has done all of their due diligence and is ready to "break ground", they can be closed much faster.
The third program is an insurance product that is called a GIC or guaranteed investment contract. This is like an annuity or life product that has a specific term usually 10 years and is backed by an A+ rated or better insurance company that guarantees the entire principal. The borrower only has to make the interest payments. This product is not accessible by bankruptcy, creditors and is judgment proof. This product is very similar to the credit enhancement and is readily acceptable by most banking institutions as collateral and is easily borrowed against.
