Post by Sapphire Capital on Jul 11, 2008 23:53:57 GMT 4
Non Recourse Loans and Self Liquidating Loans
Non Recourse Loans are loans which are secured by assets but not by personal obligation.
A very short but to the point definition and some circumstances tax wise are described at en.wikipedia.org/wiki/Nonrecourse_debt
And
www.investopedia.com/terms/n/non-recoursefinance.asp
Non-Recourse situations in finance are well known in history in regards of letters of credit or promissory notes etc if you look at the concept of a forfeit financing. (http://forum.reserve-bank.com/viewtopic.php?t=76)
In the past there was a lot of hype on self-financing loans or better self liquidating loans.
A self-liquidating loan is a loan which is secured by an investment account in which the loan is paid and covered by the profit of such investment routine in the account, which is supposedly covering the interest and repayment and leaves a healthy profit for the arranger.
Self-liquidating loans are usually not non-recourse even when they are described as such.
The reason for their lack of non-recourse character is that they contain a certain part of liability on the side of the arranger when the investment routine does not pay.
There are such self-liquidating loans which refrain from the recourse by including a combination of a project with a self-liquidating loan to allow the investment account as a sinking fund.
This for the bank combines two risks, the project risk and the investment risk.
The investment risk or the risk that the investment routine does not work and fails is looked at in terms of the arbitrage which is usually, but does not need to be, the base of such arrangement. Such arbitrage based investment routines are looked at carefully and considered in regards of the address risk which is inherent in their structure. That is specifically the case when the length of the process and the leverage used is excessive. If the investment routine is capital and money market based, meaning it uses exchange traded liquid markets instead of private and over-the-counter arrangements, the bank will look for history and references and control facts and its own involvement.
In regards of the project which is bound to the self-liquidating loan all the usual project finance requirements are necessary. A very careful look into taxes is always necessary.
There are any number of fraudsters and scam artists out there promising the world if you just pay the upfront fees for looking into the project finance etc and yes for sure you will get the money back, which at the end is not the case and no loan is there and there is mostly not even a bank looking at the details. In the process a lot of people lost everything. (just some links: www.mazu.com/scams/slloans.php; www.quatloos.com/scams/selfliqd.htm;
Self Liquidating loans are technically not difficult but they are difficult to bring together in a secure fashion and most of the usual avenues are not available to the newcomers and it is not a market for grey-market brokers.
Non Recourse Loans are loans which are secured by assets but not by personal obligation.
A very short but to the point definition and some circumstances tax wise are described at en.wikipedia.org/wiki/Nonrecourse_debt
And
www.investopedia.com/terms/n/non-recoursefinance.asp
Non-Recourse situations in finance are well known in history in regards of letters of credit or promissory notes etc if you look at the concept of a forfeit financing. (http://forum.reserve-bank.com/viewtopic.php?t=76)
In the past there was a lot of hype on self-financing loans or better self liquidating loans.
A self-liquidating loan is a loan which is secured by an investment account in which the loan is paid and covered by the profit of such investment routine in the account, which is supposedly covering the interest and repayment and leaves a healthy profit for the arranger.
Self-liquidating loans are usually not non-recourse even when they are described as such.
The reason for their lack of non-recourse character is that they contain a certain part of liability on the side of the arranger when the investment routine does not pay.
There are such self-liquidating loans which refrain from the recourse by including a combination of a project with a self-liquidating loan to allow the investment account as a sinking fund.
This for the bank combines two risks, the project risk and the investment risk.
The investment risk or the risk that the investment routine does not work and fails is looked at in terms of the arbitrage which is usually, but does not need to be, the base of such arrangement. Such arbitrage based investment routines are looked at carefully and considered in regards of the address risk which is inherent in their structure. That is specifically the case when the length of the process and the leverage used is excessive. If the investment routine is capital and money market based, meaning it uses exchange traded liquid markets instead of private and over-the-counter arrangements, the bank will look for history and references and control facts and its own involvement.
In regards of the project which is bound to the self-liquidating loan all the usual project finance requirements are necessary. A very careful look into taxes is always necessary.
There are any number of fraudsters and scam artists out there promising the world if you just pay the upfront fees for looking into the project finance etc and yes for sure you will get the money back, which at the end is not the case and no loan is there and there is mostly not even a bank looking at the details. In the process a lot of people lost everything. (just some links: www.mazu.com/scams/slloans.php; www.quatloos.com/scams/selfliqd.htm;
Self Liquidating loans are technically not difficult but they are difficult to bring together in a secure fashion and most of the usual avenues are not available to the newcomers and it is not a market for grey-market brokers.