Key Facts:
- Client: US based UBO
- Loan amount: £11,000,000
- Loan to value: 65% LTV
- Share Type: Shares listed on New York Stock Exchange
- Interest Rate: 1.80% per annum
While single stock portfolios are often cited as being 'high risk', it's not an unusual position, especially for high-net-worth individuals. Borrowers can use them to create liquidity, buy assets, or purchase a property. Single stock loans can also be used to reinvest to seek new investment opportunities and potentially higher returns than the original shareholding.
In this case, we helped a US based client secure a £11 million loan against his shares. The client was an employee of a US analytical company focused on scientific research and patents. The company had a $15 billion market capitalisation and was listed on the New York Stock Exchange. The client's shares were valued at c. £18 million and held in an UBO. Due to employee renumeration as part of their contract, however, the shares were restricted.
Despite the difficulties, we successfuly arranged a convertible, 65% LTV loan, allowing the UBO to retain equitable rights of the shares throughout the loan. Generally, the loan-to-value will be lower for single stock loans than for a loan collateralised against a more diverse portfolio. The more illiquid your stocks or the more challenging the lender thinks they will be to sell if you default on the loan, the lower the loan-to-value ratio you’ll be offered and the higher the cost of the loan.
Single stock loans are complex to arrange, and the small details matter. Enness acts as a partner at every stage of the transaction, handling all the fundamental elements of the deal on your behalf, troubleshooting and handling whatever we can to ensure the process requires as little of your time as is possible. Read more about stock-based loans (Lombard lending).
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
