Securities-Backed Debt Financing

Fast Growing and Expanding Companies are faced with significant challenges in raising necessary capital:
  • Equity markets are very challenging for many companies, even larger, more mature companies that need growth and liquidity capital for near-term needs.
  • Banks and other Lenders are very cautious about funding loans and debt capital in this market, particularly to riskier companies, and many lenders still struggle with liquidity issues of their own.
  • Opportunistic debt providers and hedge funds offer terms that can be aggressive with expensive equity kickers and high interest rates as well as seek company assets for collateral on debt investments
  • Timing to close on most types of funding transactions is protracted, creating liquidity obstacles to companies seeking near-term growth capital or working capital

The Securities-Backed Debt Financing structure is an ideal capital raising option for companies that need capital that is cost-effective and quick to close.

Other points to consider:

  • Debt capital provided that is collateralized by publicly traded securities only - non-recourse to the borrower and avoids encumbering valuable company assets. Up to $500M USD;
  • Any publicly-traded marketable securities can be used as long as they meet minimum daily trading volume requirements and exchange requirements;
  • Attractive, high loan-to-value ratios and low interest rates;
  • Minimal due diligence and time burden on the company;
  • No dilution impact on the company;
  • Timing to close is very fast and efficient with entire process typically closing within a week;
  • The securities-backed debt structure has been established for over 35 years, being utilized by banks in their interbank lending repurchase (REPO) transactions to manage their income and balance sheet stability;
  • These types of transactions historically have not been offered to non-bank customers as banks are subject to regulations such as Regulation U and Regulation T, which prohibit them from executing these transactions with non-bank entities or outside clients;

This funding vehicle is being privatized, and certain specialty institutional equity funds are being established to provide this same securities-backed debt financing structure to new market participants:

- Publicly traded operating companies of any industry
- Governments and municipalities
- Sovereign wealth funds
- High-net-worth individuals

Princeton, represented in Brazil by Candex do Brasil Ltda is an Affiliate of A Leading securities-backed debt financing International Firm that structures and directly funds this type of securities-backed debt financing

Banks can now participate in these debt structures by investing in the institutional investment funds that provide these structures to other participants

The securities-backed debt financings are high-LTV ( as low as 50% and as high as 100%, depending on stock and company), low-coupon, non-recourse debt instruments that are collateralized only by freely-trading marketable securities, which can be the securities of your operating company or those from any existing investment portfolio

The funds maintain the expertise to trade and hedge the collateral securities to minimize the risk to their portfolios.

We Have the Answer to Your Immediate Financial Needs

When looking for working capital or growth capital, or when seeking to gain leverage from an investment, securities loans offer a more flexible alternative with significant advantages:

  • A fast process with full terms including loan-to-value % and coupon rates provided within 24 hours
  • Rapid funding - in about 5 to 7 days
  • Non-recourse - the borrower can walk away at any time Low interest rates, fixed between 3% and 5%, paid quarterly
  • Flexible terms available - 3 to 10-years terms
  • It is a loan - not a sale - the borrower keeps all market appreciation
  • The funds can be used for any purpose - working capital, refinance existing debt, asset purchases, etc.
  • High loan-to-value ratio of up to 90% - the main drivers of LTV are how actively the security is traded on a daily basis and the risk profile of the security
  • Not credit score driven - only the securities posted as collateral determines the LTV% and interest rate Flexible terms with options to payoff, refinance or renew

Process Timeline

This example illustrates the execution process of a securities-backed debt investment and how we will work with you from the start of the lending process to the end of the loan term. Our goal is to provide clear communication and personalized service throughout each step of the process.

Princeton signs NDA's with companies, accepts $35K deposit /retainer ( fully refundable if not pursued) and success fee contract with companies that are interested in pursuing program.

After the borrower agrees to do the securities-backed loan and all the contracts are signed with Investment Firm, the securities are transferred to the loan provider. Once the securities are received (either by Lender or major International Bank) and cleared, the process of creating a strike price will begin, which includes the three-day moving average from the time stated in the agreement. After this three-day moving average has been established, the loan provider funds the loan.

When the loan provider funds the loan and the securities are received, the loan provider analyzes the current market conditions, then starts the process of managing the risk of the collateral's price movements. By consistently repositioning the portfolio between securities and cash allows the loan provider to make market-neutral spread trades day in and day out over the course of the life of the loan without affecting the stock's price.

This constantly evolving position is what permits the loan provider to consistently repatriate loans no matter what the price is and at the same time give lower-than-market interest rates and higher loan-to-value ratios.

The loan provider is held to the strict market manipulation rules set forth in the Securities Act of 1933 and the Securities Exchange Act of 1934, and strongly adheres to these rules. The loan provider does not short sell prior to receiving the shares and does not participate in front running methods and can memorialize this in writing if the client wishes.

The benefit to the securities-backed debt provider is price appreciation over the course of the loan to take advantage of the evolving long position held in the security. By allowing the market to move within its natural state, the power of compounding increases the debt provider's velocity of money substantially.

Transactions Backed by Strong Banking and Legal Relationships

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