What's a HedgeLoan?

At HedgeLender LLC, we hope and believe as we always have that our services can be a useful complement to your existing securities finance and long-range financial plans. That's the spirit behind the original HedgeLoan®, and it continues to define this, our signature brand.

We facilitate securities-backed loan quotes with a variety of custom features, but our original loan offering has always been our trademark HedgeLoan®. From the start, it has been a loan in which the risk of loss to lender and repayment by borrower was mitigated (though not eliminated) by have the loan structured with a public or private option. The"Hedge" in both our name and our brand has therefore always meant only what the dictionary has always said it means, and has no relationship whatsoever to any form of hedge fund, for example:

Today HedgeLender only offers institutional, stay-in-account/title funding through a major U.S. brokerage and banking firm, and HedgeLoan® applies solely to our Premier stock loan program. The intention of this process is to mitigate the majority of the risk to the lender (and thus indirectly to the borrower) in the event the borrower is forced to default on the loan. This is the essence of what we call a "limited recourse" securities-backed loan. Ideally, the borrowers risk of having assets other than the shares attached or at risk in default is limited to the collateral shares, because the exercise of the option is sufficient, together with the surrendered shares, to satisfy the repayment of the loan.

With Premier HedgeLoan® only one form of hedging is used, one where the client authorizes purchase of a public stock option as part of the loan. These loans normally come with no margin calls, interest-only terms, and higher loan-to-value than is common with conventional margin loans, but still operate under the purpose credit restrictions of FRB regulations U, T, and X, the most of important of which prohibit use of proceeds for the repurchase of marginable securities (i.e., one cannot use the loan proceeds to purchase more marginable stocks). .

Like all HedgeLender Premier securities loans, these loans allow prepayment at any time with zero penalty, loan-to-value at up to 95% (for selected federal securities), and even the ability to swap the collateral shares for similar collateral in the middle of the loan term, at lender's discretion. They represent a professionally managed, very secure, well-structured form of financing in a U.S. SIPC-member institution with a proven track record covering many custom securities-backed loan variations. A licensed account advisor is assigned to every client as well.

So to recap: HedgeLender offers a range of institutional, stay-in-your-account-and-name securities-backed loan services we call Premier, and the idea behind our Premier HedgeLoan is simply to mitigate lender loss and borrower repayment risk so as to limit recourse to the lender to recoup what the borrower owes primarily to the collateral shares and the exercise of the structured option. This type of securities loan structure is only open to those portfolios where optionable shares can be found, and purchased, as part of the loan itself.

When the lender does not use any other asset beyond the collateral securities and the exercise of the option to satisfy the debt, then it is essentially a limited-recourse loan, and this can serve as a hedge in the case of default. The lender may also add various additional features for the borrower per his risk model and borrower preferences, and at its best, will provide an attractive, feature-rich securities loan tool in the process.

It is always important to fully understand your contract and your loan terms prior to undertaking any form of securities-collateralized lending. We at HedgeLender LLC strongly urge you to ask questions and to have your loan contract reviewed by a third party (for example, your CPA or your attorney) prior to signing, particularly if you are undertaking a HedgeLoan structure. Full disclosure and detailed information is available on any and all HedgeLender loan services for those who have signed a no-obligation Term Sheet in advance. HedgeLender also urges our clients to speak freely with their licensed financial advisor to ensure that any and all questions are answered prior to their concluding of any loan offered through our services. HedgeLender staff are, of course, always available to assist you by email, phone, or in person.

We are proud to say that after ten years, our Premier HedgeLoan (as well as our other securities-collateralized loan services) can be an excellent solution to your upcoming financial challenges or objectives.