Credit Enhancement Program

In today's lending world only the best projects and best clients are able to get financing, and many projects and clients just aren't strong enough to induce a lender to risk their assets. There is a solution: a credit enhancement. In effect, the enhancement provides an additional level of collateral in order to induce the lender to make the loan. Below is a description of how the program works, and contact if you need access to this resource to help get your project funded:

The product is primarily utilized as a "credit enhancement" type product. There are two principal types of uses for the product:

1) to serve as a "balance sheet enhancement" for certain types of entities that have regulatory capital minimum requirements...in particular insurance companies, banks, and investment banks

2) to be paired with a lending institution whereby the lender accepts the Treasury derivative securities (TDS) as primary collateral for making a loan, and the TDS group takes the collateral from the company that would normally go to the lender

The minimum loan size for both transaction types is $10 million, and large transactions are preferred. Opportunities in the hundreds of millions are a good fit, they can technically go into the billions but good quality projects at that level needing these types of capabilities are rare. The minimum loan period is 12 months, they much prefer lengths of 5 years or longer. The typical cost of the TDS is around 7.5% per year, and they are not interested in revolving credit type situations where balances are drawn and paid down on a regular ongoing basis.

Life insurance companies are an ideal fit for the first transaction type as their models are very statistically predictable. As a general rule the insurance companies would get a loan of the TDS which can go on their balance sheets as "capital" vs. debt, and thus be able to write additional premiums pursuant to regulatory requirements and limitations. The TDS firm takes a pledge of controlling interest stock or other types of assets as collateral. It is much less costly than raising equity and much easier in an environment such as this, and the program works perfectly where the insurance company bank does not need cash.

With the second transaction type, the TDS must be paired with a lender. The lender takes the TDS as primary collateral, leaving the borrowing company's stock and tangible assets as collateral for the TDS. We would generally expect to lenders to lend against the TDS at a rate of 4-6% per annum, making the all in cost in most cases 12-13%, not counting our fees.

The TDS has as an underlying instrument a U.S. Treasury bond, typically of a minimum size of $3 billion. Every Treasury bond carries a unique CUSIP identifying number, and the bond is then "carved" into smaller segments which carry their own unique CUSIP number for tracking...and to ensure that there is no possibility of fraudulent duplication of the value of the underlying asset. The maturities of the underlying bonds vary, so references are always in terms of market value...not face value. As a general rule, we would expect lenders to lend to at least 90% and potentially 95% against the market value...which is a direct function of the length to maturity. There are no "interest coupons" accompanying the TDS product.

Only high quality, low risk projects will qualify as the group managing this portfolio of Treasury bonds has no interest in earning even higher yields by pursuing riskier opportunities. Examples of acceptable projects would be sound infrastructure projects, energy projects (but not "wildcat" type oil drilling and mining, etc.), high quality real estate projects (land, existing bldgs., and construction). There is particular interest in casinos (including tribal casinos in the U.S.). U.S. and foreign "stable" countries are the geographic area of interest.