China Evergrande Group (3333.HK) Case Study & Benefits of a Non-Recourse Securities Loan
Michael R.
Capital Markets@Mountbatten Global|Direct Lender, Lic’d&Reg’d Fund|Loans Against Stocks&Cryptos $1M+|Liquidity for Listed Co’s,Executives,Founders,HNWI/UHNWI&Family Offices|
The following is an informational case study to show how the use of a Non-Recourse Securities Finance (NRSF) product could have benefited a shareholder.
In this example, we will compare a sale of 1.2B shares (@ HKD $0.29/share) by an insider of China Evergrande Group on Nov 25, 2021 with an estimated value of this sale at HKD $348,000,000.
If this transaction had been performed as a NRSF loan on Sept 1, 2011 at the price of HKD $2.90 @ 55% LTV with an Origination Fee of 3%, the client would have received a net value of HKD $1,856,580,000.
The difference in value between the sale of the shares vs a NRSF loan would have been HKD $1,508,580,000 to the benefit of the shareholder by a factor of x4.
After funding of the loan, the eventual default caused by either the decline in the share price or the suspension of trading of the shares would have allowed the client to protect upwards of HKD $1,856,580,000 or USD $237,033,916 in personal wealth tied to the shares.
The protection of wealth (or hedging) is possible because the loan is a purely non-recourse credit facility and thus the only risk or loss to the borrower would have been the shares pledged as collateral to the lender. The unpaid loan balance would not have been subject to repayment or any recourse because the loan was non-recourse in nature.
This case study is purely for the use as an example as to how a Non-Recourse Securities Finance product from Mountbatten Global can provide significant benefits to shareholders vs selling via a Block Trade or using a Bank Margin (Recourse) Loan.
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If you are a shareholder or an agent representing a shareholder who has a sizable position in a listed company, especially a Chinese property firm that is listed on the Hong Kong Stock Exchange (HKSE) and is interested in finding a way of protecting what remains of their wealth that is concentrated in those shares, please contact me today to discuss how Mountbatten Global can help you.
Michael Rowe
Director
The Mountbatten Global SPC Fund