Dubai Asset Backed Securities Lending

There are various types of securities or asset backed loans available to Dubai-based borrowers. Where lenders only used to offer Lombard loans against highly liquid, listed stocks, today there is more choice, reflecting the variety of securities typically held by high-net-worth individuals and families - especially those in Dubai and the UAE. You will find that there are more options to suit different types of security that you can put forward - unlisted stocks and pre-IPO stocks are prime examples.

Lombard Loans

The most common type of portfolio finance is Lombard loans. Usually, stocks, shares and bonds are pledged as securities for this type of finance, although sometimes lenders can consider lending against life insurance policies with a surrender value.

A short-term financing option, a Lombard loan will allow you to borrow funds for a week or up to 36 months at maximum. This type of finance usually uses highly liquid, listed stocks as collateral, and many mainstream lenders only lend against stocks on the largest stock exchanges. Experts in brokering Lombard loans on securities listed on smaller stock exchanges or against less liquid stocks, Enness will be able to support you to source and negotiate a loan regardless of the jurisdiction in which your securities are located.

Whatever you need finance for and however much you are looking to borrow, Enness will broker a competitive Lombard loan package for you.

Single Stock Loans

Single stock loans came onto the market recently, and not all lenders provide them. While they are still a niche lending product, they are offered more widely than they once were (mainly by smaller lenders) who noticed an increase in the number of wealthy individuals and families that held just one or two lines of stock. Seeing the increasing demand for this type of finance, niche and alternative lenders brought single stock lending to market.

Highly specialist and expert lenders offer single stock loans. They will usually be a viable choice if you have considerable equity tied up in a single line of stock. There has been significant interest in single stock loans from Dubai-based borrowers (both Emirati citizens and expat residents). This type of loan can be ideal if you own shares in a family business or if you are an entrepreneur whose wealth is linked to one or two enterprises you have built up or are invested in. Most lenders cannot lend against single lines of stock, and those that can do so tend to be specialists. Provided there is a logical reason for why you have significant shareholdings in one or two lines of stock (as opposed to it being the result of a poorly executed investment strategy, for example), high-value lending is a real possibility.

Pre-IPO Loans

Pre-IPO loans are increasingly popular with borrowers, given more and more companies give employees stock options before they go public. Often this means that significant equity is tied up pre-IPO companies, either in Dubai or abroad.

If you have pre-IPO stock, accessing the capital tied up in your equity is usually very challenging. Selling these stocks is generally difficult (and can be impossible) due to restrictive covenants but selling them is rarely advantageous from a fiscal or future appreciation perspective. Usually, you will hope to see the value of your equity rise after the IPO, and waiting until the company lists before selling your shares is in many cases more beneficial than selling pre-IPO. Borrowing against pre-IPO stock is one way to create liquidity without losing out on the future upside of your shares.

Unlisted Stock Loans

Unlisted stock loans are also relatively new on the market. Lenders used to find it too complex to offer this kind of loan, but with the rise of very successful private businesses and family-owned companies, more lenders have looked to provide finance against unlisted stocks. This type of lending can be very interesting if you are based in Dubai or the UAE and own a successful private business that you do not plan to take public.

You can use unlisted stock loans for various purposes, including accessing significant liquidity, reinvesting in the business in search of increased growth, returns or revenue and other investments, either on the stock market or into other ventures or opportunities.

If you are based in Dubai, the UAE or MEA region, you can use Lombard loans to create significant liquidity, usually to pursue a specific goal or objective. For example, Lombard loans can be used to:

• Purchase real estate (whether residential, commercial or investment property)
• Diversify an existing investment portfolio
• Create liquidity to invest and scale a business
• Chase a time-sensitive opportunity
• Make various types of investment that offer high returns than the original shareholding
• Etc.

Lenders will always want to know how you plan to use the loan and why you need it in the first place. Here, you will need to demonstrate that you have a well-thought-out proposal that makes sense in terms of execution.

Your exit strategy (how you intend to pay back the loan) will also be important to lenders. How you present your plans is often one of the most critical elements in securing a competitive Lombard loan offer, and Enness will be able to help you do this. Usually, lenders are open to how you will exit the loan – disposal of assets, refinancing, using a settlement of some kind, accrual of income and so on will all be options. Most importantly, however, your plans must be feasible, and the numbers must add up. If your lender is not confident in your proposed exit, you will not be able to borrow, regardless of your overall net worth, income or financial standing.

When it comes to portfolio finance, how much you will be able to borrow is always determined by the value of the securities you own, your plans, how long you want to borrow for and your exit.

It is generally relatively straightforward to organise portfolio finance yourself if you own a large amount of very liquid securities on large stock exchanges. Here, it can be possible to approach lenders directly, although you may be able to borrow more if you work with a broker.

However, identifying and securing attractive offers from lenders who offer Lombard loans can be more difficult if you are based in Dubai and your assets are listed on the exchanges like the DFX or ADM. Few lenders provide portfolio finance against securities on small stock exchanges with relatively few listings. If your securities are listed on smaller stock exchanges outside of the UAE, if you own illiquid stock, possess a large number of shares in a single line of stock or private businesses, working with a broker will be imperative for getting the best loan and, in many cases, your ability to borrow at all.

Enness brokers have access to lenders who can handle more unusual portfolio finance (pre-IPO loans, loans against a single line of stock, unlisted stock lending, etc.). Often, Enness will be able to source a financing solution for you, even if other lenders have turned you down. Able to source and negotiate high-value loans against illiquid equities or in cases not served by mainstream lenders, Enness will be able to help, whether you are based in Dubai, elsewhere in the UAE or across the MEA region.

Securities-backed lending will see you pledge your shares with a lender in return for a credit facility you can use at any time during the loan term. Because lenders need to protect themselves against fluctuations in the value of the shares over the loan term, you will usually be able to borrow a maximum of 50% of the value of your shares. However, some lenders can offer a little more, although this depends entirely on your background, other assets and the type of securities you put forward.

Enness will help you borrow as much as possible against your securities and secure the most competitive rates and terms.

Enness can source high-value portfolio finance or asset backed securities lending from various lenders, many of whom specialise in a specific type of lending, e.g., single stock loans. Many Dubai-based borrowers (whether Emirati nationals or expats residing in Dubai) initially approach their bank or trading platform to apply for a loan, but many are turned down. Non-resident borrowers, high-value borrowing, illiquid securities, and the type of securities you own can all create roadblocks. Sometimes it may not be possible to borrow as much as you need. In other instances, you will find you cannot borrow at all – especially if you have a complex situation or own securities that few mainstream lenders can lend against.

Looking at your securities, how much you need to borrow, and your requirements, Enness will source and negotiate competitive finance for you, regardless of your nationality or where you are based. Cross-border lending is common, and Enness’ brokers have a track record of supporting wealthy individuals to borrow against their international securities.