Individual: PLC
What Information is on the Loan Liabilities Tab?
• Outstanding Balance
• Facility ID
• Line Size
• Committed / Advised
• Purpose / Non-purpose
• Borrowers
• Pricing
• Auto Debit Account
• Pledge Accounts / Collateral
• Default Grade (DG)
• Loss Given Default (LGD)
What are the types of Lending Products we offer to individuals that are more customized?
- Coinvest
- Unsecured
- Concentrated Stock
- Fine Art
- Yacht/ Aircraft Financing
What is the purpose of a Subscription line?
To help bridge a capital call. Funds draw on our subline to delay calling capital too frequently or to streamline the capital call process. (i.e. quarterly etc.) this allows funds to be more tactical with investments.
Who are the heads of USPB lending practice?
Jeff Kaveney and Katy Lingle
What is a PLC?
Portfolio Line of Credit (EML - Eligible Margin Loan)
- lending against T+3 marketable securities
Can I apply for an art loan with the art that is held in my own home?
Yes - art can be held in approved locations and since this is acting as our collateral we need to be notified if it is moved in any capacity.
What is our collateral?
Uncalled Capital commitments of investors.
What is the base rate that we use for our loans? (Bonus: what is it today?)
SOFR!
secured overnight financing rate
How is the advance rate of a PLC determined?
Different securities have different assigned lending values.
Ex)
- Equities - typically capped at 50%
- Bonds - 50-85%
-MMFs - 98-99%
What is the collateral of an unsecured loan?
Nothing! That's why it is the most risky!
How do we determine the advance rate?
We construct a borrowing base. This is a list of all investor commitments to the fund. After determining the creditworthiness of the investors, it will determine an a advance rate (aim for >50%). This determines how much we are willing to lend against the investors capital commitments.
What is a Letter of Credit?
An LC is essentially an irrevocable undertaking for the payment of money, issued by a bank at the request of the borrower (the sponsor) in favor of a third-party beneficiary. The LC will only be drawn on by the beneficiary if the borrower fails to meet its obligation.
What does Purpose vs Non Purpose mean?
if a line of credit is designated as a purpose facility, then the client has indicated that they want to use the facility proceeds to purchase or carry stock on margin. If the facility is marked as non-purpose, that means that the proceeds of the line will be either invested in bonds or taken out of the bank so the client will not be able to use the line of credit to purchase stock using leverage. (Designated in Form U-1) *impacts the LV on collateral*
What is a coinvest program? How do the partners fit in to it?
When private equity partners commit capital in their various funds, partners can utilize a co-investment loan program at JPM to use leverage to fund a portion of their capital calls.
Impact on the J curve?
The ability to delay calling capital enhances the manager’s flexibility to execute deals and shortens the J-curve, enhancing the fund’s Internal Rate of Return (IRR).
What is a margin call?
When the outstanding amount on the line of credit is greater than the lending value of the pledged collateral
Can I (Reilly) have a PLC with the only pledged account being in Jess's name?
No - what allows the PLC to have favorable capital treatment is the fact that the borrower and (at least) one pledgor account name must match.
What are some typical covenants?
- UEL (% of loan or % of oustandings)
- Net Worth
- Additional Indebtedness
What firm size/ fund size do we typically look at?
Firm AUM: $1B-$50B+
Fund Size: $750MM min
What does LTV mean?
Loan to Value = Loan amount / value of collateral. If value of collateral decreases, LTV increases meaning there is less collateral supporting the loan.