SEQ definition

SEQ. 00000002" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="890" N="1">

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SEQ. 00000048" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="847" N="47"> O0) -47 -higher-variance (i.e., high risk, higher return on equity) projects. For the borrower, the EPA can increase the availability and reduce the cost of credit by providing an economical alternative to a comprehensive set of protective covenants usually imposed by the bank to achieve the same result. Second, it offers a reward to the bank for credit or special services offered to a borrower (e.g., a "bail-out," a commitment for continued availability of funds through difficult times). From the borrower's viewpoint, the EPA can be a fair and relatively painless way of paying for useful services on a conditional basis. This may be especially important for non-prime borrowers (the typical small business case) whose market power and price elasticity are low or nonexistent. Arguments were also advanced regarding economic and financial structure barriers to the use of EPA. For example, when a borrower has taxable income, the cost of debt is usually well below the cost of equity on an after tax basis. — The EPA then becomes an expensive financing vehicle. Where no taxable income exists, the cost of debt and cost of equity are more nearly equal after tax, and the debt-equity cost differential argument is reduced in importance. Also, it is well known that the stock market as an "exit route" for EPA vehicles has been very uncertain in recent years. In the paper a variety of internal and private placement alternatives were demonstrated which make the EPA feasible, even with small-firm borrowers. Finally, certain public policy questions were addressed and arguments advanced concerning the prospective impact such pricing would have on banking and its relation to the economy. The conclusion of this paper is that demand for this type of financing will grow and that it should be governed through regulation and not through prohibition. - I.,.-L~ —IL~~ ~ ~ ~L*~U~i I~ IL~C-I~I~1 ~CI II CCICI~I - I — C -CI1~l <PB REF="00000049.tif" SEQ="00000049" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="872" N="48"> REFERENCES [1] Comptroller's Manual for National Banks (Washington, D.C., U.S. Comptroller of the Currency, Sec. 7312, January 1969), p. 37. The effect of this has been confirmed with Mr. ▇▇▇▇ ▇▇▇▇▇▇▇, Chief Counsel, Comptroller of the Currency. [2] Private communication &jith the office of the Comptroller of'the Currency, Washington, D.S., April 27, 1980. [3] Paragraph 7, U.S...

SEQ. 00000041" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="891" N="40"> -40 - * Bank loans will become far more prominent at the expense of publicly traded issues, which will shrink in importance. * ▇▇▇▇▇ will attempt to demand strong guarantees or equity kickers from borrowers, this giving them a greater say in corporate decisions. [21] If the commercial banking industry is to increase the scope and market share of its credit activity it must come to grips with two major problems, purchased funds now equal about 2.25 times core deposits; and bank equity equals less than four percent of bank assets. The combination of pressures will require an imaginative response from the banking industry. As a result, the role of analysis and judgement has become critically important in the credit function. In developing the customers required for continued growth, banks will need to accomodate the needs of firms in various stages of development, including less mature firms. In many cases banks will be required to extend the equivalent of risk capital: unsecured, long-term funds, the repayment of which is dependent on future earnings. This will demand an analytical approach more closely resembling that of the common stock analyst than that historically associated with the bank credit analyst. For years, high risk commercial loans have been handled through installment loan financing where add-on interest, strict amortization, and the chattel mortgage made such loans bankable. More recently, banks have chartered small business investment companies (SBIC) to provide long-term financing to small companies with high growth potential. Equity participation is virtually a standard feature of SBIC operations and the volume of equity realizable by the bank's SBIC (in terms of value at time of closing) will represent.a large voting interest in the borrowing firm. The use of EPA's as supplemental compensation on non-SBIC business loans differs distinctly from their use in SBIC operations. The bank cannot realize voting power or dividends from this method of pricing commercial loans because <PB REF="00000042.tif" SEQ="00000042" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="844" N="41"> it cannot effectively hold the stock. The volume of warrants a bank may take without fearing S.

Examples of SEQ in a sentence

THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
TO THE EXTENT THAT NO PENDING LAWSUIT HAS BEEN FILED TO OBTAIN THE APPOINTMENT OF A REFEREE, ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE REFEREE, MAY APPLY TO THE COURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION BY THE COURT OF THE DECISION OF THE REFEREE IN THE SAME MANNER AS A PETITION FOR CONFIRMATION OF AN ARBITRATION AWARD PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1285 ET SEQ.
THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ.
Each Note issued hereunder that has more than a de minimis amount of original issue discount for U.S. federal income tax purposes shall bear a legend in substantially the following form: “THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ.
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ.

More Definitions of SEQ

SEQ. 00000050" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="826" N="49"> -49 - [16] The seminal work on this application is ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇, "Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure," Journal of Financial Economics, Vol. 3, October 1976, pp. 305-360. A valuable treatment of a variation of the application is found in ▇. ▇▇▇▇▇ and ▇. ▇▇▇▇▇▇, The Theory of Financial Decisions (New York: McGraw Hill, 1979) Ch. 14 et. seg. [17] ▇▇▇▇▇ ▇. ▇▇▇ Home, "A Linear Programming Approach to Evaluating Restrictions Under a Bond Indenture or Loan Agreement," Journal of Financial and Quantativ tive Analysis, 1, June 1966, pp. 68-83. [18] Van Home, Financial Management and Policy, Englewood Cliffs, N.J. (PrenticeHall, 5th. ed,., 1980) pp. 284-291. [19] ▇▇▇▇▇▇ ▇. ▇▇▇▇, Is There A Place For Equity Kickers In A Community Bank? (Boston, Financial Publishing Company, 1972) pp. 92-110. [20] ▇. ▇▇▇▇▇, "New Interest in Incentive Financing," Harvard Business Review, July-August, 1966, p. 101. [21] "New Era For Banking," Business Week, April 21, 1980, p. 94,95. - — ' --- —- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~II2 -- - - ~cLI </DIV1> </BODY> </TEXT>

SEQ. 00000010" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="887" N="9"> -9-... the FDIC's five-year $325 million loan... will be interest-free for one year and bear interest set at 125% of the FDIC investment portfolio yield for the subsequent four years. At the current portfolio yield, the interest rate would be 10.67%. The FDIC loan will be subordinate to the assistance from the banks, but senior to the First Pennsylvania Bank's existing subordinated debt holders ahd stockholders. The $175 million in loans from private banks will be for five years, at a certificate of deposit rate established annually. They will be subordinate to depositors and other general creditors but senior to other subordinated creditors, including the FDIC. As part of the package, First Pennsylvania will issue to the FDIC and the assisting banks warrants to purchase 20 million shares of its common stock at $3 per share. The warrants have a seven year life and any proceeds must be invested by the holding company as equity in the bank. [10] This credit arrangement has since been approved by First Pennsylvania stockholders. The pricing scheme very clearly employs warrants in what is obviously a trade-off for reduced interest payments both initially and over the life of the loan. The spirit of the transaction is evident in the following comment: Bank regulators believe the aid package provides "substantial rewards" to those who have agreed to help First Pennsylvania and will prevent shareholders from receiving a complete "bail-out." [1 ] It may be inferred from this remark that the trade-off of a "certain" level of interest for a return conditional on the profitability of the borrower has been accepted by the regulatory agencies. It may also be inferred that the "reward" for the partial "brail-out" is recognition by regulatory agency and by bank lenders of the use of the conditional equity participation as a premium for the acceptance of greater risk in a loan. These appear to be important inferences, especially in the light of the following comment: Some banks have used income participation clauses with commercial term loans and with loans on income properties, such as apartment houses. Although the authors believe that such clauses make economic sense, legislative threats to make all the interest on such loans non-deductible for the computation of income taxes and to outlawd income participations <PB REF="00000011.tif" SEQ="00000011" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="8...

SEQ. 00000044" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="877" N="43"> -43 - There are, of course, opportunities for a bank to "tout" the stock of borrowing companies. Indeed, the announcement effect of a term loan might raise the stock price, thus enhancing the warrant value. Also, a large unrealized capital gain could be protected by extension of generous credit terms during periods of temporary stress. Furthermore, bank pressure on management might be stronger if the equity stakes for the bank are higher. The conditional equity position could certainly influence the bank's judgement and behavior in particular cases. However, there has always been ample opportunity for bank management to abuse its trust through self dealing. The regulatory agencies, through scrutiny of operations and personnel, have actively sought to control the incidence of such abuse. The general opinion of those interviewed for this research is that equity participation loans will likely draw particular attention from bank examiners. In this case, the familiar regulatory question again arises: should potential abuse of equity kickers be controlled through prohibition or the examination procedure? It appears, at this point, that the latter method is being used, and is sufficient.

SEQ. 00000001" RES="600dpi" FMT="TIFF6.0" FTR="TPG" CNF="898" N=""> Division of Research January, 1981 Graduate School of Business Administration The University of Michigan EQUITY PARTICIPATION AGREEMENTS AND COMMERCIAL BANK LOANS TO SMALL BUSINESS FIRMS Working Paper No. 246 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ The University of Michigan FOR DISCUSSION PURPOSES ONLY None of this material is to be quoted or reproduced without the express permission of the Division of Research. <PB REF="00000002.tif" SEQ="00000002" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="890" N="1">

SEQ. 00000018" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="783" N="17"> The increment is taxed as ordinary income as received and does not provide the bank with the capital gain tax advantage of warrants. The amount of the increment is typically dependent upon the value of some variable related to the operating performance ofithe borrower or the project being financed. One approach bases the performance-related supplement on some current flow variable such as total sales or net profits of the firm. If the purpose of the loan is not tied to some specific, revenue generating program, but is expected to increase the total net profit of the firm, this device offers certain advantages. Cash income is realized by the bank in direct proportion to increases in the performance indicator thus removing the intermediate step of having the performance reflected in the price of the stock. The problem of secondary sale of warrants is thereby removed. Where the credit advanced is identifiable with a particular project or asset, the flow variable may relate to the project rather than the firm as a whole. The advantage of this device is that the expected value of the project's flow variable may be more predictable than that of the borrower's firm as a whole. The lender may have particular expertise which allows him to be confident in estimating the success of, say, a real estate development. An EPA based on the project may be considered to have a higher probable expected value than one based on the borrower's total performance.

SEQ. 00000022" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="790" N="21"> -21 - 1. There are no transactions costs; options and stocks are infinitely divisible; and information is available to all without cost.

SEQ. 00000042" RES="600dpi" FMT="TIFF6.0" FTR="UNSPEC" CNF="844" N="41"> it cannot effectively hold the stock. The volume of warrants a bank may take without fearing S.