How Securities Lending Works
- Borrower provides ICON information about their securities. (a recent monthly statement from borrower’s security house works best.
- There are NO Upfront Fees, NO Credit Check, NO Income Verification, NO Personal Guarantees and NO Closing Costs.
- Based upon the securities pledged, the loan-to-value (LTV) ratio and the interest rate are determined. Securities with greater activity & higher liquidity will render a higher LTV ratio and a lower interest rate.
- A Term Sheet/Loan Commitment is then issued to borrower for review.
- Borrower reviews and approves the Term Sheet/Loan Commitment.
- A conference call is held between borrower and lender for clarification.
- The Pledge Agreement and Contract are sent to the borrower for signatures.
- The securities are then transferred to the lender’s brokerage account.
- Lender tracks the closing price of the shares for 3 days for an average price.
- The loan is then disbursed based upon the LTV & Terms agreed upon.
- Borrower makes Interest-Only quarterly payments.
- During the loan term prepayment of the loan is not allowed.
- Any dividends from the securities is credited to the quarterly interest-only loan payment first with any excess interest being returned to the borrower.
- Default trigger is set at 80% of the loan amount - not 80% of the securities value (like most typical margin loans). For example: with securities valued at $10MM, and a loan amount of $8MM, the default trigger would be $6.4MM (80% of the loan amount – not 80% of securities original value).
- If the securities value fell below $6.4MM the borrower could walk away from the obligation of repayment of the loan and keep the original loan proceeds ($8MM) or contribute cash or securities to bring the value back up to $6.4MM.
- If borrower walks away, borrower would forfeit the collateral. Although, should a default on the loan occur, unlike margin loans, since this is a non-recourse loan there is no personal liability.
- The time frame for loan funding is usually completed in 5-7 days.
- At the end of the loan term the loan is paid in full and the same amount of shares are returned to the borrower.
- Borrower may also have the option for the loan to be extended or refinanced.
- The ONLY collateral is the pledged securities.
- Loans available for up to 80% of securities’ current market value.
- Borrower retains Beneficial Ownership.
- Borrower receives ALL dividends & upside market appreciation.
- Funds may be used for ANY PURPOSE (Personal or Business).
- Interest ONLY payments.
- Fixed interest rates typically range between 2% – 5%.
- Loan terms available at 3, 5, 7, or 10 years.
ICON’s Commitment to Our Clients
ICON’s Loan Criteria – Qualifying Securities