Funding Deposit Scheme Delivers Discounted Equity for Investors

Online, November 5, 2009 (Newswire.com) - A new opportunity for seasoned alternative investors has arisen out of the rapidly growing LCLI (Leveraged Collateral Loan Instrument) which is now funding many major property projects around the world. LCLI uses collateral provided by Ultra/High Net Worth Individuals (U/HNWI's) to leverage available capital from the client to a ratio of 1:100. Ie: for every $1 deposited by the client, the U/HNWI's leverage it with their own assets to collateralise $100, which is then provided by one or more of the world's leading banks. The preferred minimum deal value is $100m, so this would require a deposit from the client of $1m.

For the major property companies the 1% is usually manageable and Equility Capital, which filters and feeds deals into LCLI is currently transacting some $4bn of these deals. However, funding is available for non-property companies but many of these cannot find the necessary 1% deposit. For instance, a start-up airline, which will be the only onward transatlantic connection from Stansted airport, one hour north of London, which takes in flights from more European airports than any other airport in Europe, has been offered $100m of funding if they can find their 1% deposit.

David Rose, CEO of Equility Capital said: "This situation creates a tremendous opportunity for savvy investors. The 1% deposit is held with the bank issuing the LCLI (HSBC, BoA, Bank of China etc) for 45 days while the instrument is being prepared and then returned with the first funding tranche. So investors can negotiate a rate of interest with the borrower for the 45 days the 1% is on deposit but, more important, they can also negotiate an equity share in the company being funded."

Rose used the example of the airline which would pay a negotiated rate of interest for the 45 days the 1% was on deposit, but would also offer 30% of equity in the business. Effectively 'free' equity in a new airline with no debt or industrial relations legacy, taking on aircraft at rock bottom prices, with a stellar management team and slots at Kennedy and other US airports already reserved. Equility can make similar deals available across innovative aerospace, renewable energy, automotive and other companies worldwide.