1 Compensating Balance Structured Collateral Finance Strategy i Cap Ventures, Inc. Irvine, CA Miami, FL
2 Collateral Depositor QIB or High Worth Investor SecuresCollateral Depositor QIB or High Worth InvestorInvests in Bank CD’s for Guaranteed YieldLending Bank or Syndication of Banks10 Yr Loan toBorrower Interest Costis tied toCD SpreadIt is pre-arranged that the Bank agrees to make Client Company Loan in a like amount as the Deposit. The Deposit is not collateral for the Loan. Acceptable Collateral is acquired from the Loan to secure Loan.
3 Collateral Instruments & Guarantees Secured – GIC Formed Secures Required Portfolio of Benficial Interest in Death Benefit of Life Ins. Policies of People 70+ Years OldBenficial Interest Transferred Into TrustGIC TRUST10-Yr Term Certain Re-Insurance Guarantee AddedCollateral Instruments & Guarantees Secured – GIC Formed
4 Compensating Balance to GIC Lending Package Arranged The Collateral Investor’s CD’s Allow for aCompensating Balance for this Financing StructureDepositorOptional Equity Kicker Incentives$32.8M CD’s$32.8M Cash DepositCollateral is Registered in UCC Filings AgainstBorrower and the GICLending Bank$5.7M 2-Yrs Pre-Paid Int.Reserve AccountBeneficial InterestLoan Payments$17.1M Collateralized Guarantee (GIC)& FeesGIC$32.8M Face Value10 Yr Loan toBorrower Interest Costis tied toCD’s Spread$32.8M Corporate Loan$10M Net Cash Infusion to Borrower Operating Account
5 How Guaranteed Insurance Contracts (GIC,s) Are Applied Re-Insurance Guarantee to Pay 100% of Life Insurance Benefits in 10-Year TermGICLife Insurance Policies Which Transfer Beneficiary Interest to GICLending Bank or Syndication of BanksGIC Transfers Beneficary Interest to Bank for Loan CollateralHow Guaranteed Insurance Contracts (GIC,s) Are Applied
6 Declining Loan Balance as GIC Policies Mature $500,000$1,000,000Declining Loan Balance-$5,000,000$ 27,800,000Lending Bank or Syndication of BanksBeginning Balance$ 32,800,000Insured Dies 1 Yr-$2,500,000$ 25,300,000$5,000,000$2,500,000As Insured Die Policys Pay to BeneficiaryInsured Dies 18 MonthsAt End of Term Re-insurance Pays all Policies that have not Matured – 100% Guaranteed
7 GIC 50% of Loan Lending Bank or Syndication of Banks = 110% of Project CostLending Bank or Syndication of BanksVenture Project BorrowerMaintains GIC Premium Payments or comes from early Maturity of GICPre-Pays 2-Yrs Interest OnlyPays Yrs 3-10 Interest on Net Loan from Cash Flow50% of Loan= 100% of Collateral Cost Collateral Value = 100% of LoanPays 100% Loan Remaining BalanceGIC
8 Lending Bank► Receives Cash Deposit from 3rd party Investor or QIB (arranged by iCapVentures), purchasing a $32.8M 10Yr CD’s from the Lending Bank.► Bank then loans a compensating amount ($32.8M) to Borrower for a 10-Year Term - receives2-Yrs pre-paid Interest, and fully compensating collateral of Re-insured Guaranteed Insurance Contracts (GIC) with a face maturity value of $32.8M AA-rated and term 100% guaranteed byre-insurance. Lending Bank is the Beneficiary of the GIC.► Bank receives interest only payments from Borrower on the Net Loan for years 3 – Yrs 1 & 2 are pre-paid from Loan proceeds on the front end.► Bank may also take a 1st (or subordinate to any existing lender secured) position on the Assets Borrower acquires with the Net Capital.► Borrower also agrees to use the Lending Bank as the depository for all banking trans-actions for the Borrower business.► The GIC matures at various stages during the Term to the benefit of Bank (beneficiary of GIC) and pays down the Principal in tranches as GIC has maturity events, and any remaining balance is 100% guaranteed and paid at the end of term by the AA-rated re-insurance contract. This provides 100% guaranteed return of Principal and a certain however variable IRR.
9 Lending Bank (Cont.)► Bank also receives an Equity kicker or additional ROI from the cash flows of the business. This additional return is applied against the Borrower Loan Interest cost it ties to the CD. Any off-setting interest deficit is paid to the Bank by borrower from the business or enterprise Cash Flows. Principal is 100% guaranteed and paid to the Bank from the maturity of the GIC, and additionally secured by the assets acquired by Borrower.► Lending Bank is incentivised to do this type transaction as the will be able to demonstrate:● Minimization of Credit & Reserve Exposure ● Quality Loans on its Books● Growth of Customer Deposits● Reduction in Probability of Problem Assets● Exploits A Unique Market Position
10 Collateral Depositor (QIB) ► Invests $32.8M with the Lending Bank for the purchase of 10-Yr CD’s at prevailing rates for a guaranteed yield.► CD’s are never at risk, as their is no connection between the CD’s and the Loan to Borrower. The transaction is solely for the purpose of creating a Compensating Balance.► Depositor additionally gains from Equity Kicker or additional interest negoiated with Borrower. An investment with no down-side, only up-side potential.
11 Borrower ► Receives a 100% securitized Loan ► No payments for initial 24 Months – Interest payments are financed for this period► Pays interest only at a low rate of the spread between the CD and Loan► Borrower never pays back the Principal of the Loan, as the maturity of the GIC in yrs pays the Bank (the beneficiary) 100% of the Principal of the Loan► If development project is able to pay off the principal of the Loan earlier than the 10-Yr Term, the beneficial interest in the GIC is transferred from the Lending Bank to the benefit of the Borrower. GIC can be sold and cashed out early, or flipped to the next transaction of Borrower as the structured collateral instrument (which now has a shorter maturity guarantee, i.e., if in 5-years, the Principal return can be 100% guaranteed in 5-Yrs).
12 iCapVentures► In cooperation with Borrower, secures Depositor and assists in negotiating favorable terms and conditions of the transaction as described above.► In cooperation with Borrower, secures Lending Bank for transaction on the basis of the structure described herein.► Provides GIC Trust collateral instruments and documentation► Resources Life Settlement collaterals to the criteria of Re-insurer (see further information on this below). 1 to 1 up to 1 to 1.2+ coverage.► Resources Re-insurance wrap for a 10-Year fixed date certain – 100% guaranteed pay-off of the balance of Principal Loan and any remaining Interest.