DPLC Funding

 

DPLC Funding Program (Overview)

Borrow money today at the low annual rate of 30-day Libor, (less than 0.5% as of today), plus one-time fees totaling 3% at closing!

In today's market, banks have significantly less cash yet we still have billions of dollars to lend at low rates. Many lenders today are asking borrowers to move their deposits in order to obtain their loan; yet your bank does not want to see you pull your deposits. We help by keeping your banking relationship intact while the bank receives fee income from the DPLC. Hence, a win-win-win.

The purpose of a Direct-Pay Letter of Credit is to reduce the aggregate cost of financing. An interest-only loan at 30-day Libor is ideal for most any borrower. Moreover, depending on your relationship with your bank, a DPLC can generally be obtained for 0.75% to 2.00%. We can also pay this fee for you at the time of closing from the proceeds.

How to apply for financing:
After consulting with one of our lenders, a business desiring to borrow from us first obtains a DPLC from a tier-1 U.S. bank—or the U.S. office of an international bank. If the bank you’re working with is not tier-1, it should be no problem for them to get a wrap from a tier-1 bank. Also, a foreign bank can be used as long as a tier-1 U.S. bank (or U.S office of an international bank) serves as the confirming bank. We will work with the bank to fund the proceeds directly to your account.

We begin syndication process once we receive a Letter of Intent from your bank stating that they would be willing to issue the Direct-Pay Letter of Credit. Since the DPLC is the collateral, no other documentation such as financials or personal principal information is required. We will not draw on the DPLC unless there is a default in the monthly, interest-only, 30-day Libor payments or the small annual renewal fee, (0.15%). Your bank reserves the right to increase, decrease or amortize the DPLC each year.

We finance 100% of the value of the DPLC, less the one-time fees deducted from the loan at closing.

 

DPLC Transaction Procedures

1. The client’s bank submits a Letter of Intent, (LOI), to the lender stating that they will be able to present a Direct Pay Letter of Credit, (DPLC) at closing.
2. Once the lender receives the LOI they will put the client’s bank in contact with their trustee bank to discuss the specific terminology for the DPLC. (The LOI is also used to initiate the lender’s funds being transferred into the trustee bank. The lender’s trustee bank will be along the lines of Bank of America or BB&T).
3. A tabletop closing will be scheduled 2-4 weeks from the presentation of the LOI.
4. The lender’s trustee bank will white-wash the funds as required by the US Patriot Act.
5. At the closing, the DPLC is placed with the escrow attorney.
6. The hard funds are then also placed with the escrow attorney.
7. The DPLC is then released to the trustee bank.
8. The cash funds are then wired into the clients chosen bank account.
9. All fees are paid at the time of closing.

DPLC Transaction Questions and Answers

Q: From the issuance of the LOI, how long for the cash funds to hit the trustee’s bank and how long does it take to clear the funds as dictated by the US Patriot Act?
A: The total length of time from the issuance of LOI for the funds to be placed into the trustee’s bank, for them to be cleared and the funds placed into the clients bank account is 2-4 weeks.

Q: Are there any restrictions on the usage of the cash funds?
A: No, there are no restrictions on what the cash funds will be used for.

Q: What is the minimum amount for this transaction?
A: The minimum transaction is $25 million. Transactions under $100 million may incur a fee totaling more than 3%. The exact fee is based on the amount of the transaction, as well as the term of the loan.

Q: What is the LTV? How much are the fees and do they include Facilitators fee?
A: The LTV of the loan is 100%. The lender’s and trustee bank’s fees total 3% and are paid from the transaction at closing. The facilitator’s fees are 0.5% for transactions up to $100 million and 0.25% for transactions of $100 million or more. The facilitator’s fees are paid by the borrower in an agreement separate than the one used at closing.

Q: How long does it take for the cash funds to come over once the DPLC is placed with the escrow attorney?
A: The funds are wired into the borrower’s bank account and confirmed by the borrower’s bank while at the closing table.

Q: What is the term of the loan?
A: The money may be kept out as long as the DPLC is intact, but not too exceed 5 years.

Q: Other than the fees at closing and the annual rate of 30-day labor, are there any other fees?
A: The lender will not charge additional fees. The trustee bank will charge 0.15% each year after the first. This charge will be added to the annual rate if 30-day labor and will be paid monthly with the interest-only payments. Lastly, the client’s bank will most likely charge a fee each time the DPLC is extended.

Q: How are payments made?
A: Interest-only payments are made monthly to the trustee bank.

Q: Can the lender or trustee bank call the loan?
A: The loan may be called only in the event of one of the following:
1. . The monthly payment is in default. 
2. . The term of the DPLC is up and the DPLC is not renewed.

 

Example

You need $100M for a project you’re working on.

Cost at closing :

3% (The lender’s and trustee bank’s fees total 3% and are paid from the transaction at closing)

0.50% (The facilitator’s fees are 0.5% for transactions up to $100 million and 0.25% for transactions of $100 million or more. The facilitator’s fees are paid by the borrower in an agreement separate than the one used at closing.)

3.50% total at closing

Plus 30-day labor is .45% (2/9/09 bankrate.com)

First year rate less than 4% *

* The funding program is dependent on a bank being willing to underwrite the project and put up a Direct Pay Letter of Credit. Our company will put up the funds that would then be guaranteed by the DPLC. The bank will most likely charge a fee for the DPLC.

* Also, keep in mind that at closing the $100 million (minus fees) will be deposited into an interest-bearing account at your bank. Therefore, you will earn interest from your bank on the portion that has not yet been drawn out for your project.

Simplistic example: Suppose you will only use $20 million during year one of the project. Therefore, you put $80 million into a 1-year CD earning 2%. You would earn $1,600,000 in interest.

Year 2

30-day libor +0.15% = 0.56% 2nd year rate*

30-day libor is 0.41%(2/9/09 bankrate.com). Hold our money for three years and it's about 1.5% per year INCLUDING points* * assumed current rate

 

Important Note Regarding Your Bank

While we find that it typically works best to have us help introduce our program to the bank that will putting up the DPLC, some borrowers prefer to present our program on their own.  If you decide to speak to your banker without us, we strongly recommend that you emphasize how our program will benefit them.
1. You are still a client the bank’s and the bank will earn money by charging a fee on the DPLC.
2. All of the borrowed funds will be immediately wired into their bank at closing and will stay there until it is drawn down by your project. A deposit of this magnitude should have some positive effects for their bank.
3. The program gives the bank a "free look" at the project to determine if they would like to take over the loan when their cash position allows.
4. If the money will be used by the borrower for a project, then the bank’s DPLC, will be double-collateralized on day one. The bank has both the collateral that was provided by the borrower, as well as the cash that is deposited into their bank! While the money in the bank will be drawn down over time by the borrower, the bank will always be collateralized between 100% - 200%!
5. If the bank has a portfolio of toxic assets, (REO and non-performing loans), we have a separate, very equitable, program that may be able to help them immediately.

In order to engage the bank, our program must be introduced to them in such a way that they see the value it brings to them.  Otherwise, some banks may feel threatened; as if they're losing their client.  It's critical to point out the contrary.  Our program not only allows them to stay in the deal with their client, but it does so without them having to use any of their money. In fact, it may also provide an infusion of capital. 

As a last resort, if the bank is reluctant to issue the DPLC, you can negotiate the interest that they would pay you on the amount that you deposit.  For instance, if the bank is currently paying 3% on large cash deposits that will be untouched for one year; you could offer them your deposit for less interest, or even no interest.  This would be comparable to them earning 1-3% on the yet-used balance of the loan.  We recommend that you not offer this right out of the gate as the 3% you would earn would significantly reduce the cost of the money you're borrowing.  Plus, the bank's opportunity to lend out based on your deposit should be way more valuable to them than the 3% they would pay you.