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Sample Loan |
• Stock owned: 10,000 shares of ExxonMobil
(U.S.: XOM).
• Borrower pledges 10,000 shares of ExxonMobil for loan. The loan-to-value
ratio (LTV) is determined to be 75%.
• Borrower reviews the Term Sheet, Contract and Pledge Agreement and then
transfers the 10,000 shares to the lenders brokerage account.
• On the day the shares clear and post to brokerage account, the closing
price for XOM (as reported by Bloomberg™) is $72.90.
• The closing prices for XOM on the next two business days are $73.10 and
$72.76.
• The average of these three consecutive closing prices is $72.92 ($72.90 +
$73.10 + $72.76 = $218.76 / 3 = $72.92). This is the “strike price” for this
loan.
• The total value of the pledged collateral (for purposes of determining the
final loan amount prior to funding) is $729,200 (10,000 x $72.92).
• The loan amount is 75% of $729,200 or $546,600.
• The loan funds are disbursed and the proceeds are wired into the borrowers
bank account.
• Borrower makes interest-only payments quarterly.
• Any dividends from the securities is credited to the loan payment first
and any excess is returned to the borrower.
• At the end of the loan term the loan is paid in full and 10,000 shares of
ExxonMobil (the exact same amount of shares originally pledged) are returned
to the borrower. The loan may also be extended or refinanced.
• The time frame from start to finish may be as little as 7-10 days.
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