Bridge Loans DurbanDurban bridging loans
und Leiter der Leasing Group par Union Bank of California
Presenter is Keith Martin with Chadbourne Washington. Gisela Kroess, can you lend at a local banking institution to make installments for windmills? In my opinion, most creditors ceased granting loans for wind power about 15 to 18 month ago. Bankers are reluctant to take out such loans in the present markets because they fear that the price of wind power plants will be lower.
While we may be willing to grant a bridging credit backed by all funds in the projects, the level of progress on the projects would have to be sufficient to minimize the risks to them. The building should be operational, but for official permits and the like. No big help for a builder who has to spend a great deal of money before he can begin work.
KROESS: You also have development people trying to find capital to pay these costs. Gearshift, what proportion of the costs of the projects can you be expected to meet with building funds? KROESS: If you involve an own capital bridging credit for the Treasury Barzuschuss, for which the building is expected to be eligible after completion of the building, a client can lend up to 80% of the costs of the building work.
Because of the size of preservative debts on the markets, the projects must have 1. 0 x debts cover with the one-year P99 starting number. You will receive an extra 30% with the Equitybridge loan or the Treasury Cashflow Grant. Chris Stolarski, do you concur? ARTIN: Let's stay with Gisela's mathematics and proceed from the assumption that there are two installments of debts.
A bridging credit of 30% of the costs of the projects exists, which will be paid back with the Treasury Cashflow grant at the end of the building period. We have a seperate installment for 50% of the costs of the projects, which is converted into a long-term liability. Does the interest rate on the bridge credit line fall?
They' re both building loans. Unless the operation is completed, no instalment will be reimbursed. KROESS: It comes down to how comfortably you deal with the building risks and the probability that the building will be completed. Building risks of a standard windfarm are quite small. Usually it is a brief building time.
When you have a sponsorship with a demonstrated record of success in completing a project where it begins to build, a case for lower prices can be found on the Equity Bridge installment as it is essentially a mortgage against a government loan. What does a 50% rebate mean?
When the interest coupon on the convertible bond is 7%, what is the interest coupon on the bridging bond? KROESS: If you have a 3% spread and an advance payment on the forward credit facility, which means you are charged 3% more than your cash costs, the interest and advance payment on the equity bridge facility can be fixed at 2%.
Our tendency is not to discourage the bridge tranche because the risks are the same for both of them. In the event that the operation is not finalised, neither of the two instalments will be reimbursed. KROESS: You no longer have any conventional mortgages on this one. The building indebtedness of many of our offshore windfarms was raised with taxable own capital on conclusion.
Today, the building lease includes an obligation to transform into a long-term liability if there is insufficient taxable capital. A higher interest and advance payment on that part of the building indebtedness which is higher than the amount of the Treasury's forthcoming liquid contribution are therefore warranted. When the building credit is converted into a long-term liability at the end of building, the operation is completed and the creditor transforms the credit with its own funds.
There is a lower chance that this will not happen than the payment of the amount of money for which you estimated at the beginning of the work. I' m not saying that there is a high level of credit for the Treasury not to make the subsidy payment, but there is more credit for it than converting the credit into a maturity at any given moment.
KROESS: I think that if you are really satisfied with the instructions given by the Ministry of Finance on how the programme for granting subsidies in the form of liquid funds works, and we, and you can see how quickly subsidies in the form of liquid funds are actually disbursed, then you can feel very at ease with this particular level of exposure. Conversion into long-term liabilities, in particular in the case of bank bills, is a higher level of exposure.
Martin: Many creditors who speak at panel meetings this year have said that banks' debts are 350 bps above LIBOR and a 300 bps charge has to be upfront. The liabilities have a maturity of seven to ten years. The loans are granted in a Mini-Perm-Struktur. You think the store is there today?
These are liabilities to banks, not debts of insurers. Greater cash returns to the markets. It has not been a big shift; I don't think you will see that as much as a progressive restoration of cash to the debit side. Gisela Kroess, you told the jury today that the prices have shifted from seven to ten years to eight to twelve years, but the prices have not moved.
We' ve seen the palette of miniperm tenors move up to 12 years in recent month, and only recently have I learned from some bankers that have been willing to fully repay long-term liabilities over a 15-year period, but that will be the rare one.
In my view, there is a gradual increase in liquid assets throughout the banking world. -MARTIN: How many financial institutions are operating in the windmarket? Martin: The option to liabilities to banks is the liability of insurers and this is usually much longer time. There are four or five insurers that deliver debts, right?
Well, the market's a little unchecked. Pricing in the retail placing markets was not in line with that of banking institutions. Nevertheless, our retail placing activities, which are more indebted at the company rather than at the individual transaction stage, have regained their competitiveness following the performance of the benchmark bonds markets. I' ve spoken to some of my co-workers in mutual fund companies who deal with retail placing and I think they can get $500 million in the form of US dollar per venture.
You' re gonna give me a 20-year, fixed-rate loan? to MARTIN: Variable interest rates on loans from banks? KROESS: There used to be some business where the sponsors could make the most of both by arranging a short-term banking facility within a longer-term institution-based facility. When you get back to John Anderson, you tender 20 years of debts.
Institutions offer seven-, eight-, ten- or twelve-year loans in mini-perm-conversions. Deposits from banking institutions are quoted at approximately 350 bps above LIBOR with an advance payment of 300 bps plus a swapping fee. ANDERSON: It's difficult to say where the institution markets are because every weeks rates are changing, but it's something like Treasuries plus 350 and 1% in advance.
Martin: Most bankers insist that the whole consortium be assembled before one of them finances, and no one takes more than about a $50 million ticketing. There is no 100% financing of the underlying markets, but we can see that banking is returning to it.
Let's move on to fiscal justice. Do you feel that there is as much interest among this year' s development community in getting taxpayers' money as there has been in the past, as the Treasury offers to give development community a large part of the fiscal subsidy in the form of money?
What I think did happen in the early part of the year with the subsidy facility is that the developer is focussed on getting their mortgage going with a long-term borrowing so that they knew they had a pullback where they could just stay with the indebtedness. Now, they are researching fiscal justice options that can make business more profitable and eliminate the need to use the concept of guilt.
Therefore, designers evaluate other architectures. HOWELL: The greatest challenger in the industry this year was the failure to fund energy procurement contracts. However, we still see many programmers wanting to turn their project taxes into running money. Fiscal justice is in great demand. What is it?
And we think there will be a whole bunch of dealings next year. Lance Markowitz, a US based development company, is on the spot and is currently trying to increase the capital for a windfarm through a sale-leaseback. MARKOWITZ: Cashflow is much more unforeseeable because there is less predictability of what will happen with winds. Leasing models are increasingly being used in the photovoltaics sector.
KROESS: The other problem with renting is the debit tenor. It is difficult, however, to conclude a contract without long-term liabilities close to the duration of the contract than the mini-perm financing currently available on the markets. MARK: So it will cost more for the builder to get the object back at the end of the life, and, Gisela Kroess, your point is a mini-perm liability at the leaseholder stage creating Complications if he needs a ballon deposit before the taxpayer equities investors reach their ROI targets.
To return to you, Yale Henderson, how many affluent taxpayers are there currently in the industry? Tim Howell, any feeling for how many fiscal capital providers are there? In MARTIN' s view, the actual rates of taxation in the windmarket seem to be between 8% and 9%, perhaps at the lower end of the range.
Today there are shops on the open markets that certainly belong in this area. My census is that there have been five Windfield Twinning Flipp Rate Agreements with Bar Subsidies since 9 July, when the Ministry of Finance declared how the Bar Subsidy Programme works. So that would be a grand total of eight for the year?
HOWELL: We assume that we will complete at least a few more conventional fiscal operations by the end of the year. That' my son, that' s wind? I' m counting 10 possible deal this year. In comparison to 2007, when there was something like 18. HENDERSON: We're discussing new obligations in 2009 for ongoing business.
We' ve made five transactions this year. That was all breeze? Yes, but no bar grants. to which you pledged yourself before the collapse of the markets? Four were legacies. So, you've made a new bargain since July 9th? I' m not sure where this is taking us.
Earlier this year it sounded as if there were a series of transactions, but most of them were legacies and none were cash-funded. Five bar allotment agreements have been in place since 9 July with a further five to be concluded by the end of the year. For how long will a fiscal equities investor incur an obligation at the beginning of building to finance the fiscal capital?
For example, the longer the engagement, the higher the return? Martin: The Internal Revenue Service said last week that developer may have an opportunity to buy the remaining stake of the offshore venture capital firm after the buy and sell deal at a firm rate determined at the beginning of the deal.
Does fiscal private capital investor ask for a higher return in return for the fact that the client receives a buying possibility at a fix rate? And I don't see that the IRS notice has a big impact on what the markets have done, especially when you consider that most of the business being done on the markets today has 20-year electricity purchasing contracts.
Martin: Tim Howell, is there an additional fee to give a buy writer a flat rate buy? So every programmer should ask for such an optional feature. HOWELL: You can, quite openly, but the strike must be a P50 case, so the end fix could be higher than the current value if you actually come to the time.
HENDERSON: The great value lies in stores where the electricity sales contract is less than 20 years. When the PPA is only five or ten years and the PPA is subject to rising electricity costs and potentially rising CO2 and RE price, the debate here will be very interesting.
In the past, there was a general practice that the fiscal credit collected through a Partnerschaft Front would pay 65% of the costs of ownership of a traditional windfarm. It was more like 50% before the Ministry of Finance switched to bar subsidies. How much of the total principal costs can be invested in a today's Flip Credit Suisse CIB?
As I count the subsidy as part of this financing, we get back 30% of the costs of the projects 60 workingdays after the funding. So 25% to 40% fiscal fairness in addition to the social security allowance? Tim Howell, do these numbers ring true? HOWELL: We provide a wider product portfolio so that we can finance 50% to 90% of your projects costs, with or without debts at the projects?level.
Subsidy in the form of money amounts to 30% of the costs of the work. As a rule, we see that fiscal financing of own funds accounts for an extra 20% to 25% of the costs of the projects in uncompleted transactions. This is the amount of money that the projected release will yield. If there are debts at projekt levels, what would the financial structures look like?
MARKOWITZ: The taxpayer right provides a further 15% or 20% of the principal in addition to the liquid assets subsidy. Gisela Kroess, I think you said that the traditional windfarm will provide about 50% of the long-term financing for the costs of the projects. What is the necessary degree of cover when using P50 numbers?
Chris Stolarski, are you in the same place? So if you have 50% debts, what's the remainder of the equity base? My response is the same with or without debts. HENDERSON: We're not so actively looking for leveraged deal, but it's a very interesting structur from an investor's point of view, especially this year when there's still a 50% write-off bonuses on properties.
In the first 60 trading sessions the Treasury Cashflow grant and the amortization allowance will probably give the investors almost all of their funds back. Does it make you uncomfortable as a fiscal equities investment to get all your monies back so quickly? You want your capital to stay in your investment and generate a long term profit.
Union Bank's Lance Markowitz has offered investors the opportunity to simultaneously invest both fiscal capital and long-term liabilities in a single development opportunity. We' re selling the forward credit to another creditor. It'?s a way to draw the debts. Have you had many buyers for the MARTIN? MARKOWITZ: We' ve done a few dealings, but we' re not doing them today because the subscription markets are largely non-existent.
So it'?s difficult to sell the bond again. Henderson Yale, how much of a bonus is calculated the taxation equities investors in the actual rate when there is debts at product scale? It is concerned with borrowed capital at the individual projects and evaluates the return on capital for taxation purposes in the lower to middle teahouse.
The stated returns, however, are deceptive, as the taxpayer receives a large part of his capital invested back in the first 60 to 180 trading day. So, does the in-house ROI overestimate the actual load on the developers? HENDERSON: The largest part of the returns is quickly covered by the Ministry of Finance Treasury subsidy and write-offs.
Focusing exclusively on current capital flow is likely to result in a pre-tax rate of yield of only 2% or 3% on a pretax capital base, if not lower. What if someone wasn't on the shelves this year? What, if anything, has happened to the way twinning slip-deals are done in a money-grubbing age?
HENDERSON: I think the main thing that's changing is that you can make short quota deal. Partner relationship slip deals were prior to the bar award patterned so that the slip was screened in year 10 under a P50 case. A deal can turn around in the sixth or eighth year. The amount of the prospective capital flows you want to dispose of to the taxable entity will determine this.
One of the main limitations is that financial accounts run out of funds before they can accept a full write-off of the investment. MARKET: Tim Howell, one of the ways humans have bypassed the issue that the sponsor has too little funds accounts to be able to absorb fiscal advantages is that the sponsor agrees to make a commitment to restore the shortfall, which means that the fiscal equities sponsor agrees to return funds to the partner if he has a shortfall in his funds accounts when the partner is liquidated.
Do taxable private capital providers still accept the commitments to restore the deficits? In the past, the general principle was that an individual agrees to return up to 20% to 22% of his invested capital. Today, depositors are more likely to accept a deficiency make-up commitment to persist in protective measures, such as specific revenue distributions to remove the deficiency after the slip with extra funds given to the depositor to make it complete.
Lance Markowitz, will you accept a make-up commitment for the shortfall? Is there a line how high it can go, or is it open? HENDERSON: Financial position deficiencies are more acceptable in bar allotment operations. There is a danger in the case of transaction with output taxes that the investors will not be able to take over all the write-offs, but also that output taxes will be transferred to the owner, who will not be able to use them.
It is not a risky scenario that the amount of the subsidy will be transferred to the client after the end of the period of the investor's withdrawal from the principal accounts. There are a number of fiscal private equity firms that want to make investments and then want to divest the securities they hold. If returns rise from the point at which they were when the fiscal equities transaction was made, the value of the security decreases.
Do you have a large alternative store? But how do vendors of stocks bought at low returns prevent a losses if they continue to trade the stock in today's markets? Today, the only vendors on the stock exchange are bankrupts with no option. They' re selling to get money to cover the debt.
Let's briefly discuss pre-paid services for you. As part of a long-term electricity agreement, the production of the plant will be sold to a utilities company. Do you feel at ease creating fiscal justice for such a venture? In economic terms, the advance payment corresponds to the borrowed capital at programme stage. MARKOWITZ: There' s nothing wrong regarding the organization, but there are more dealings on the open road than there is enough free space to make them all, so we spend our free times with other organizations that work better for us.
Chris Stolarski, what do you anticipate from the bond markets for the rest of this year? Well, I don't think so, but the markets could reach 70% to 75% of what they were. -MARTIN: Rising liquid funds bring lower interest rate? MARK ET: So more guys can rent, but they still have the same prices?
Delays remain in dealing and creditors choose from among prospective dealings. The 1% you're talking about is the prepayment? Two or three years ago, building loans were offered for spreads of up to one and a half quarters. Last year, we concluded a number of indebtedness agreements in the windmarket and 18 contracts with a total value of approximately 3 billion dollars.
It does not take into consideration the institutionally traded bond and notes trading area. Institutions' indebtedness has added at least another $1 billion. John Anderson, what do you see for the bond for the rest of 2009 and 2010? ANDERSON: We completed a funding deal this year, but hadn't completed one for 12 consecutive years.
It' s good to see the bond institutions coming back to live with prices that are still viable. As I see it, the dynamics of the overall economy will pick up when we start 2010. What is a good year for your store? What is the number of transactions you would like to make in a year? This was a mix of corporates, venture capital and venture capital.
When there are many financings for projects, that's great, but if not, we put the cash into company loans or fundraisers. Lance Markowitz, what do you see for the rest of this year and 2010 for the stock markets? So I think we will see more investor back on the markets in 2010 and there will be a much bigger dealer outflow.
Tim Howell? HOWELL: The 2009 shortage was the shortage of debts and fiscal justice. Lance Markowitz: The worse is over in relation to fiscal capital and indebtednessquidity. There will be no return of the markets, but they will gradually recover. Yale Henderson, what do you see for the stock markets for the remainder of 2009 and then 2010?
HENDERSON: We'll close the deal and get cash out the front doors this year. Some of the old actors who were no longer on the scene in 2010 are coming back. In 2009, we invested a great deal of our resources in finding other potential buyers to do business with us, as we have a limited engagement in a particular investment being made.
With three to five prospective buyers, we believe we are making headway and hopefully some of them will be with us by early 2010.