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AIG Debenture Finance Program Summary Portal

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AIG Debenture Finance Program Summary Portal AIG Ltd. Commercial Bancorp ALIANT INVESTMENT GROUP LTD. CBC Private Debenture Capital Finance Program (PDCFP) (Summary, Procedural mechanics, Critical path &Costings) As follows: The following summary is provided in explanation and support of commonly asked questions and in provision of specific information / disclosure regarding private debenture capital finance, its guidelines and associated applications. This information is intended to educate and focus, assisting with the understanding of the program, its terms and conditions as well as all its parameters. Simply put the Private Debenture Capital Finance Program (PDCFP) is a hybrid debt program that utilizes the CLASS "A" preferred shares of a company as security, capitalized by Financers through a private/commercial pre‐qualified capital finance market Portfolio, that AIG on a Correspondent basis completes the underwriting for, and after which is then financed to / through and serviced by the independent commercial market network(s) in the form of (what is commonly termed) a private debenture, providing those capital funds that a client needs for a particular project or business enterprise; the company/project financed with the CLASS ‘A’ certificates providing a preferred security position of payment/repayment to the financier in the event of default or liquidation (much the same way that a mortgage lien secures a conventional debt loan). The program applies particularly well to companies that are start‐up in nature and/or otherwise by their nature simply do not categorically qualify for conventional asset or UCC based debt financing. The proposed financing that is being underwritten under this program is not publicly financed such as with the underwriting of common stock certificates that bares dividends. Again, this is a hybrid debt program. In simple terms this is an interest only loan with a principal balloon payment at the term of the proposed loan whose security (again, like that of a 1st mortgage on a piece of property ) are the CLASS "A" preferred share certificates of the company. This is also the "how" and “why” that no registrations are needed and no SEC regulations apply when using the class "A" shares as the loan security. Market analysis at the time of initial review dictates the number of CLASS “A” shares that are to be used as security for particular project finance. These are determined pro rata by the dollar amount of the required capital finance as is the dollar value / denomination . The proposed financing carries a fixed rate of return (in today's market from 8 to 12%) , and whose ROR (rate of return/interest rate) then begins to be repaid at the time the company begins cash flowing (as qualified / interest only annually), with a balloon payment of principal at term. Based on a company's pro forma, business plan, marketing plan, management and use of funds we pre‐qualify the term, rate of return and capital market(s). The loan term ranges from THREE (3) to TEN (10) years. Rate of return is determined by the project itself and the acceptable risk analysis of the current capital market(s) for that particular venue type of finance. The PDCFP may also carry a convertible feature that allows (optionally and by mutual agreement of the Financers and the client and as applies to the company’s charter regulations) for the Financer to convert his/her/their certificates to class "C" common stock and forego repayment of principal & ROR in lieu of a longer term dividend relationship with the client and business/project; thus collecting annual dividends (NOI pre‐tax) as the company prospers under the conventional Class “C” stock model. Again, this is an optional feature of the program and at the sole discretion of the client/borrower. Underwriting of Private Debenture finance takes approximately 45 to 60 business days to completion/pre‐release and then approximately another 60‐90 days to completion of close of the capital finance. These time lines are only an estimate and may vary depending on Client readiness and other variables individual to each underwriting as they occur. A one‐time underwriting/debenture programming/ Service cost applies, whose scope of services direct and indirectly are: (i) Underwriting to include qualification and completion of all data for the debenture capital finance including but not limited to accounting, risk analysis, legal drafting and completion of Capital Finance Agreements (CFA) for Capital Financers, design & preparation of certificates to be issued, related company resolutions, marketing & feasibility analysis review, interface with Capital Finance markets and proposed Capital Financers, formatting presentation of the complete CFA & certificates, website development as required, all related legal work, processing for pre‐release for close. (ii) AIG closing assistance/oversight, Fiduciary services (optional & as agreed to ), document / certificate issuance and management for closing of the individual debenture financer’s as required of each debenture capital finance installment as it takes place. (iii) Underwriting/File Submission to Capital Financers(s) on behalf of the client in their own marketing/finance efforts, if any, of the private capital finance as AIG may be called upon by the CLIENT and at AIG’s discretion and by mutual consent to act upon same. Underwriting & Debenture Closing Costs: > Debenture underwriting costs range from +/‐ .60% and on a sliding scale downward as dollar amounts increase. Final cost is determined and fixed at the time of preliminary review and qualification and whose payment is required at the time of execution of the Debenture Underwriting Service Agreement between the Client and AIG (please see the below section entitled 'snapshot' for all details of the process) . Speak with your AIG Representative regarding specific project cost based on risk and other qualification assessments made at the time of initial review. THERE ARE NO OTHER underwriting costs that apply. > Legal Fees are included in the service underwriting cost. > A Service Premium to AIG of 2.0% (as qualified) of the NET debenture, paid pro rata loan close. This is paid on direct basis (deducted from each finance installment). >Bank transfer / Fiduciary fees in the amount of 50.00 per transaction US and 60.00 per transaction international apply. These are also paid on direct basis pro rata (deducted from the close of each finance transaction) by the sending Bank. ************** PROGRAM ACTUARY DATA: SECTION I: (Summary data) Class “A” Preferred stock certificates, SOURCES & USES Class “A” Preferred stock certificates (also called preferred shares, preference share certificates or simply preferreds) are a privately issued equity or debt instrument (as the company decides to use them) of a company which may have any combination of features not possessed by a company’s publicly traded common stock including properties of both equity and/or a debt instrument, and thus are considered a hybrid instrument. Preferreds are senior (i.e. higher ranking) to common stock. NOTE: Certain use restrictions apply for "S" corporations in certain States. Please check with your appropriate regulatory agency if an "S" corp. and/or in the State you are chartered for all restrictions that 'may' apply. Preferred stock certificates usually carry no voting rights, but may opt to carry a dividend and have priority over common stock in the payment of ROR, dividends and principal capital financed upon sale or liquidation of a company as applicable. Terms of the preferred stock certificates are stated in what is sometimes referred to as a “Designation of Certificate” or similar clause included in a capital Financer’s Stock Loan agreement (SLA) as provided to him or her or them as part of capital financer’s Capital Finance agreement when the class “A” certificates are used as security to finance a company’s debt instrument. Class “A” Preferred stock certificates are a special class of shares which again may have any combination of features not possessed by common stock. The following features are commonly associated with class “A” preferred stock: Preference in interest payments or dividends if/when structured as a hybrid debt instrument Preference in principal capital finance repayment , in the event of Sale or liquidation when used as a hybrid debt instrument Convertibility to common stock as agreed to. Callability/early retirement, at the option of the corporation if used as an investment instrument No ownership or recourse rights of the investor/financer in the event of non‐payment / default by the client of interest and/or principal payment when used as a debt security instrument Nonvoting Non Management Commonly underwritten for start‐up business concerns or a company seeking to advance company growth without going to the common public market(s) or encumber itself with additional conventional debt burden(s) that could potentially adversely affect its credit rating or standing. Or simply in cases where the company does not categorically qualify for conventional asset or UCC based debt financing. Class “A” Preferred stock certificates can be but are not typically traded publicly. When used as security for a hybrid debt instrument they simply securitize the capital finance on a preferred basis. They are underwritten in the same manner as Class “C” publicly traded stocks, following the same UCC underwriting guidelines for conventional debt underwriting, but require no SEC regulation or Licensed Securities Broker involvement as they are NOT sold
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