Nexis Capital

Here’s an example of the stock loan process, including how the “strike price” and value of the loan are determined.

• Stock owned: 10,000 shares of ExxonMobil (U.S.: XOM).

• Borrower pledges 10,000 shares of ExxonMobil for loan. The loan-to-value ratio (LTV) is determined to be 75%.

• Borrower reviews the Term Sheet, Contract and Pledge Agreement and then transfers the 10,000 shares to the lenders brokerage account.

• On the day the shares clear and post to brokerage account, the closing price for XOM (as reported by Bloomberg™) is $72.90.

• The closing prices for XOM on the next two business days are $73.10 and $72.76.

• The average of these three consecutive closing prices is $72.92 ($72.90 + $73.10 + $72.76 = $218.76 / 3 = $72.92). This is the “strike price” for this loan.

• The total value of the pledged collateral (for purposes of determining the final loan amount prior to funding) is $729,200 (10,000 x $72.92).

• The loan amount is 75% of $729,200 or $546,600.

• The loan funds are disbursed and the proceeds are wired into the borrowers bank account.

• Borrower makes interest-only payments quarterly.

• Any dividends from the securities is credited to the loan payment first and any excess is returned to the borrower.

• At the end of the loan term the loan is paid in full and 10,000 shares of ExxonMobil (the exact same amount of shares originally pledged) are returned to the borrower. The loan may also be extended or refinanced.

• The time frame from start to finish may be as little as 7-10 days.