Equity Bridge Loanbridging equity loan
Bridging the equity gap of credit institutions and the financial services sector in the France equity markets
Despite not being launched on the France in 2012, the use of the Equity Bridge Facilities (EBF) by France's investment trusts has gradually grown. Consistent with international equity investment companies, France's investment companies are keen to bridge the gap between investor and investor requests for equity. Be it EBF, Underwriting Facilities or Asset Call Filities, this kind of loan is designed to pre-finance investors' equity in the mutual funds in order to streamline outflows.
An EBF may be restructured as a Revolving Loan Facilities or Maturity Facilities on a committed or unconfirmed footing and provided by one or more financial institutions, subject to the borrower's respective administration, regulation or contract. Irrespective of this, the EBF is guaranteed by the non-called equity money of the investor.
A number of investment manager believe that European Investment Firms (EBFs) allow France's investment companies to offer a level competitive advantage to competing investment companies. Despite the fact that the EBF was not launched on the France in 2012, the number of European Banking Futures Firms (EBFs) used by France's investment trusts has gradually grown and they have become very well-loved. A major reason for the EBF's attractiveness is its flexible nature, as the loan can be provided either through revolving loans, documentary credits or banking overdrafts.
The EBF thus meets all the needs of the IFI while at the same providing for the rationalization of the administration and financing of call for resources. Secure yourself a redemption commitment through the non-called down equity pledges of the investor. EBF uses resources much more quickly than makes 10 to 15 working day call for funding.
Fast and agile mobilization of financial assets can be the keys to a favorable result of a deal in the increasingly highly-competitive private equity markets. This fast approach to equity, coupled with a flexibility in discretionary redemption, makes the EBF one of the most effective tools for managing equity call.
EBF enables the EBF to "concentrate" asset withdrawals at set times (every three month, six month or yearly) through pre-financing through credit, interim financial statements and managerial overdrafts. In addition to benefiting directly from this streamlining of call procedures, by simplifying the administration of their holdings, managers can also reduce the number of call procedures, which are often too common and involve small amounts.
A further positve feature of the rationalization of call for equity is the fact that an EBF can be reached through documentary credits or underwriting. In contrast to the use of capitals call, documentary credits or bench guaranties offer the possibility of raising principal as collateral for further payment, an asset that is greatly valued by investment banks in property and investment properties.
Rather than disburse money as a guaranteed means of paying for building or investing projects, an EBF would prefer the mutuals to request a banking bond so that shareholder equity is not used or blocked, which improves the return on the mutuals' assets. The price of an EBF that is not an asset-backed facility but is hedged mainly against non-called capitals from outside shareholders is attractive.
This " low-cost " funding's margins in Europe range from 150 to 200 bps, and the brokerage charges, which are usually payable in several payments on each anniversay of the scheme rather than in advance, range from 15 to 30 bps, according to the amount and duration of the EBF.
Loan providers' exposures to risks under an EBF differ from those under asset-backed finance. For the latter case, the lender's failure to pay risks are determined by the value of its assets at the end of a three- to six-year horizon, dependent on the nature of the loan.
An EBF calculates the borrower's exposure to debt on the basis of the amount of money that allows the borrower to use his or her right to collect the principal after defaults. Creditors assign a ratings to each individual to take their own exposure into consideration. It is this assessment (together with a share of associated companies) that is used on their non-called obligations to identify the proportion of non-called capitals to be taken into consideration in the overall computation of their funding ratios.
In the case of the best-valued investees, this rate is between 90 and 95 percent of the commitments not called, while in the case of the lower-valued investees, only a small percent is maintained. Therefore, the deterioration and creditworthiness of each individual borrower should be evaluated separately in order to assess the overall EBF exposure.
As an example, a creditor could require that the non-called investor equity be at least 150 to 200 percent of the EBF's nominal amount. The combination of such calculations with short-term drawing (maximum 364 days) gives creditors more transparency about their actual exposure and allows them to provide highly competetive spreads compared to other forms of financing.
Due to its relatively low costs, its advantages and the optimized administration and fiscal effectiveness of call for funds, the EBF has become a pivotal tool in France's funds administration.