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HedgeLender LLC of Philadelphia found itself recently in a true “Perfect Storm” beginning in early October of 2008 as Wall Street sunk and the bailouts (and uncertainty) began. But the fact is that the market for securities-backed institutional (stay in client’s account and title) securities loan services couldn’t be better.
How you might understandably ask, could a company that bases its loan facilitation service on securities battered by the financial markets possibly see a silver lining in this?
First, the price of real estate in the U.S. is at an all-time low in most communities. This means that for those who do have cash liquidity, bargains are to be found everywhere, particularly for real estate investors. Also, unlike the property-purchase limits that can apply for conventional real estate loans, there are no such limits on the type of stock loan and securities finance we offer. An investor could therefore use our institutional Premier HedgeLoan to purchase as many properties as they wish — with dividends paid directly to the borrower, so that two asset classes – securities and real estate – were in theory operating simultaneously.
Second, credit markets tightened, and many investors, like consumers, found their bank’s credit windows had shut down. Projects that were half complete now found themselves in limbo while banks demanded extra cash or collateral. Many had nowhere to turn. Our securities loans were less buffeted by the credit markets or the creditworthiness of the client, however. Our Premier HedgeLoan stock loan sets eligibility by the overall quality of the stock or other securities – the volatility ratings of the stocks that are presented as collateral determine the characteristics of the final lending offer, not the client’s credit rating.
Third, the value of stocks had declined precipitously. Many investors were loath to sell their securities at huge losses just to gain cash liquidity, but the need was there. With HedgeLender’s services, they could continue to remain retain ownership of their securities – shares remain in the borrower title and account at a major, regulated, SIPC-member U.S. institution under the management of a licensed professional from that institution. The upside growth in that portfolio would of course remain the borrower’s. The borrowers need for cash now but their reluctance to sell outright and forego all future upside potential is one o the main motivations for this type of structure.
Our Premier securities loan products come with interest pegged at monthly LIBOR +4 standard, the freedom to pay off anytime without any penalty whatsoever (even a week after taking out the loan), and a “swap” feature allowing a client to swap one set of stocks for another of equivalent value (with lender’s consent) are further pluses for this security-oriented program.
You can get more information on HedgeLender LLC’s securities finance services by visiting our website, www.hedgelender.com
