Single Stock Loan for MYR75m For A Malaysian High-Net-Worth Individual

Single Stock Loan for MYR75m For A Malaysian High-Net-Worth Individual

Single Stock Loan for MYR75m For A Malaysian High-Net-Worth Individual

Stock loans in Malaysia offer a unique financing solution for shareholders who wish to leverage their stock holdings without selling them. These loans allow individuals and companies to borrow against the value of their publicly traded shares, providing immediate liquidity while retaining ownership of the stocks.

Stock loans are generally non-recourse, meaning that if the borrower defaults, the lender can only claim the stocks used as collateral and cannot pursue other assets. This makes them an attractive option for those looking to access capital with minimal risk.

In Malaysia, stock loans are increasingly used for various financial strategies, including business expansion, personal investments, and managing cash flow, offering a flexible and efficient way to tap into the value of shares in the local and global markets. However, it is important to work with reputable lenders, as the financial landscape can sometimes attract fraudulent entities, making due diligence critical.

Stock Loan Case Overview:

• Client Location: Malaysia
• Ultimate Beneficial Owner (UBO): Affluent investor
• Loan Amount: MYR 75,000,000
• Loan-to-Value (LTV): 60%
• Share Type: Shares listed on Bursa Malaysia
• Interest Rate: 3.75% per annum

Stock Loan Context and Purpose:

In Malaysia, where astute investors actively manage their wealth, single stock loans emerge as strategic tools for creating liquidity, exploring new investments, or acquiring assets. Our client, a high-net-worth individual based in Malaysia, known for their success in the technology sector, sought a MYR 75 million loan against shares listed on Bursa Malaysia.

Company Profile:

• Company Type: Technology firm
• Market Capitalization: MYR 2.5 billion
• Stock Exchange Listing: Bursa Malaysia

Challenges Faced:

Despite the client’s success and the technology firm’s solid market position, the client’s shares, valued at approximately MYR 150 million, faced certain limitations. Overcoming these constraints posed challenges in securing a loan against the shares.

Stock Loan Structure and Solution:

To navigate the intricacies of Malaysia’s financial landscape, a customized stock loan with a 60% Loan-to-Value (LTV) ratio was structured. This approach allowed the UBO to maintain equitable rights to the shares throughout the loan term. The loan featured a competitive fixed interest rate of 3.75% per annum for a five-year term, reflecting the client’s preference for a balanced interest rate.

Benefits of Stock Loan:

• Retained Equity: The UBO maintained ownership rights and benefits associated with the shares, aligning with their long-term investment goals.
• Flexibility: The stock loan provided flexibility, enabling the borrower to potentially capitalize on future share appreciation.
• Risk Mitigation: Despite the moderate LTV, the loan structure provided a viable financial solution, mitigating risks associated with the shares.

Complexity and Transactional Involvement:

Single stock loans inherently involve complexity, demanding meticulous attention to detail. Navigating the intricacies of the deal, addressing Malaysia-specific constraints, and ensuring regulatory compliance required a comprehensive understanding of the local financial landscape.

Outcome and Long-Term Impact:

This case illustrates the strategic use of single stock loans in Malaysia, with a focus on a high-net-worth individual in the technology sector. Despite specific constraints, a tailor-made stock loan, featuring a competitive 3.75% interest rate, provided liquidity while preserving ownership rights. The financial solution aligned with the client’s investment objectives, showcasing the adaptability and effectiveness of single stock loans in the Malaysian market. The client utilized the funds to explore new investment opportunities and to purchase a new yacht, contributing to the continued growth of their diversified portfolio.