EUR20m Stock Loan For HNW Company Director In France

Case Study: EUR20m Stock Loan For HNW Company Director In France

EUR20m Stock Loan For HNW Company Director In France

Background:

• Client Profile: High-net-worth (HNW) individual based in France.
• Financial Position: Significant shareholding in a French listed oil manufacturing company with a market capitalization exceeding €500 million.
• Clients Position: Client held EUR15m of shares through a long term share purchase scheme and requested a 3 year stock loan.
• Financing Requirement: Approximately €5 million.
• Loan Terms: Non-recourse, single-stock loan at a fixed 4.25% interest per annum with a three-year term.

Client’s Objective: The HNW client, a stock holder in the French listed oil manufacturing company, aimed to leverage their concentrated position in the French-listed stock for additional personal liquidity. The client’s priority was to maintain ownership of the stock, along with retaining dividends and voting rights.

Financing Solution: To meet the client’s unique requirements, a non recourse stock loan was structured against their shareholding. This financial solution allowed the client to secure liquidity without exposing personal assets to risk. The loan, priced at a fixed 4.25% interest per annum, provided a three-year term with the option to close early after 2 years.

Unexpected Challenge: The client faced an unexpected challenge when they required the financing earlier than initially anticipated.

Outcome: In response to this urgent need, the lender demonstrated remarkable efficiency by paying out the loan within an impressive two-week timeframe, aligning with the client’s accelerated timeline. The client retained beneficial ownership of their shares, maintaining entitlement to future dividends and potential market appreciation.

Benefits of Non-Recourse Loan: The non-recourse loan structure provided several key advantages:

1. Limited Personal Risk: The borrower faced no personal obligation or risk to personal assets in the event of default.
2. Economic Ownership Retained: The client retained complete beneficial economic ownership of their shares, ensuring entitlement to future dividends and potential market appreciation.
3. Strategic Flexibility: The client had the flexibility to walk away from the loan without additional financial obligation, safeguarding their overall financial position.

Conclusion: This case study underscores the strategic use of non-recourse, single-stock loans for high-net-worth individuals, especially insiders, providing access to liquidity while safeguarding concentrated equity positions. The ability to navigate unexpected market downturns without sacrificing long-term ownership positions exemplifies the resilience and strategic advantages of well-structured financial solutions, particularly in the face of unique challenges within the French market.