Prime Capital Corporation

Transcription

1 Prime Capital Corporation A Canadian Mortgage Origination and Securitization Company The Business We are not a sub-prime lender. We are an equity-based lender. We offer residential mortgages. We loan up to 90% LTV for first mortgages and 85% for second mortgages. We don t loan based upon an applicant s credit score. We loan to high net worth individuals who have verifiable equity in their homes and who desire convenience and speed of funding over pricing. 1

2 Proven Concept & Unique Leadership The two Founders of Prime Capital: Have successfully created and managed profitable conforming and non-conforming Financial Institutions and companies in both Canada and the U.S. Have reviewed in ecess of $5 Billion (Cdn) in residential mortgages Have over 40 years eperience in mortgage lending Were the first to securitize a non-conforming mortgage pool in Canada Org Chart Prime Capital Corporation A Canadian Mortgage Origination and Securitization Company V.P. Correspondent Banking & Agency Originations Stanley F. Lomas C.E.O Douglas B. Billingsley Corporate Governance Investor Relations Capital Market Transactions & Securitization C.T.O. (To Be Determined) C.F.O. (To Be Determined) C.O.O. Michael Tham V.P. Sales & Broker Relationships (To Be Determined) Broker, Correspondent & Direct Sales Marketing & Advertising Preliminary Approvals Collection of stipulations & data Underwriting V.P. Credit & Underwriting (To Be Determined) Collection of stipulations & data Verification of Borrower Info Tentative Approvals & Commitment Letters Direction to Fund V.P. Finance (To Be Determined) Funding, Monitoring, Servicing & Collections Homeowners, Brokers, Financial Planners, Financial Institutions and MICs. Homeowners, Brokers, Financial Planners, Financial Institutions and MICs. 2

3 Mission Statement To be the dominant non-conforming residential lender in the markets we operate in by providing premier customer service, consumer oriented products, integrity in our business relationships, fairness to our employees, and achieving high profitability through the quality and consistency of our lending. Objectives To provide shareholders/partners with the highest possible returns through prudent financial management without compromising the long-term goals and financial integrity of the company. To be fully operational in British Columbia by 1stQ, To offer corporate products in three pre-selected urban and high density areas of British Columbia during the first three years of operation. To originate and securitize a loan pool of between $50,000,000 and $100,000,000 within twelve months of the commencement of operations. To epand into Alberta and Ontario within four years. To become cash flow positive within twelve months of the commencement of operations. To cover all fied operating costs via origination fees and from on-balance sheet ecess spread. To create a dynamic, safe and comfortable corporate environment that attracts talented and motivated mortgage professionals who not only desire a career with unlimited opportunities for advancement but also the opportunity that allows them to maimize their income potential and achieve job satisfaction. To constantly improve and innovate, react quickly to changing market conditions in order to capture greater profits and market share, and, strive for ecellence at all times. To always maintain clear, continuous communication with investors, customers and financial regulators. 3

4 Corporate Principles Operate with high ethical and professional standards. Differentiate our company from traditional financial institutions by providing prompt, efficient and professional customer service that not only eceeds our customer s epectations but also sets the standards for industry ecellence. Treat all applicants, suppliers and co-workers with respect. Use the capital markets and strategic relationships to enhance profitability. Leverage technology to achieve the highest levels of productivity and efficiency. Maintain continuous quality control over all aspects of origination, processing, underwriting, credit review, audit, funding, servicing and collections. Aggressively control overhead by echanging fied costs with variable costs whenever and wherever possible. Effectively respond to changing market conditions by modifying loan programs to build the consumer base and accommodate investor epectations. Minimize middle management layers through development of a flat organization and a modular sales structure. Employ credible outside agencies to undertake routine administrative functions in order to enhance efficiencies, reduce overhead and increase profitability. Licensing and Regulations Licensing Prime Capital Corporation shall operate under the licenses of Mr. Douglas B. Billingsley and/or Mr. Stanley F. Lomas. Canadian Regulators The operations of Prime Capital Corporation are overseen by the following governmental regulatory authorities: British Columbia: Financial Institutions Commission (FICOM) Alberta: Real Estate Council of Alberta Ontario: Financial Services Commission of Ontario 4

5 3 Year Cash Flow Summary Net Cash Flow From Operations Year 1 Year 2 Year 3 TOTAL REVENUE Revenue - Origination Fees $ 3,180,000 $ 5,970,000 $ 8,015,000 $ 17,165,000 Interest from Mortgages (held on balance-sheet) 3,409,925 7,918,688 10,798,218 22,126,831 Securitization Revenue (NPV of Ecess Spread) 7,814,039 16,100,820 18,223,422 42,138,281 Total Revenue $ 14,403,964 $ 29,989,508 $ 37,036,640 $ 81,430,112 EXPENSES Start-Up $ 856,713 Operational - Fied Costs 2,411,800 3,131,100 3,378,600 8,921,500 Operational - Variable & Discretionary 937,846 1,617,028 2,129,191 4,684,065 Interest - Warehouse 0% Total Epenses $ 3,349,646 $ 4,748,128 $ 5,507,791 $ 14,462,277 NET CASH FLOW FROM OPERATIONS $ 11,054,319 $ 25,241,380 $ 31,528,849 $ 66,967,835 Corporate Valuation at different Price Earning Ratios Year 1 Year 2 Year 3 Cashflow from Operations $11,054,319 $25,241,380 $31,528,849 P/E ratio Valuation of 10 times EBITDA $110,543,190 $252,413,798 $315,288,486 Year 1 Year 2 Year 3 Cashflow from Operations $11,054,319 $25,241,380 $31,528,849 P/E ratio Valuation of 15 times EBITDA $165,814,785 $378,620,697 $472,932,730 Year 1 Year 2 Year 3 Cashflow from Operations $11,054,319 $25,241,380 $31,528,849 P/E ratio Valuation of 20 times EBITDA $221,086,380 $504,827,596 $630,576,973 5

6 Mortgages Funded: Years 1-3 Number of Mortgages Year 1 Year 2 Year 3 T O T A L 1st Mortgages Funded nd Mortgages Funded 606 1,138 1,526 3,270 Total Mortgages Funded 636 1,194 1,603 3,433 Mortgages Funded - $ 1st Mortgages $15,000,000 $28,000,000 $38,500,000 $81,500,000 2nd Mortgages 60,600, ,800, ,600, ,000,000 TOTAL MORTGAGE FUNDING $75,600,000 $141,800,000 $191,100,000 $408,500,000 Interest Rate - 1st Mortgage 7.99% 7.99% 7.99% 7.99% Interest Rate - 2nd Mortgage 11.99% 11.99% 11.99% 11.99% Mortgage Pool #1 Pool 1 has the following attributes: Loan Pool = $ 74,919,871 Number of mortgages = 663 (30 first mortgages and 633 second mortgages) Mean mortgage amount = $118,868 WAC = 11.52% WAM = 17 years (first mortgages at 25 year amortization and second mortgages at 15 year amortization) Mean LTV = 80.27% % in $ 1 st mortgages = 20% % in $ 2nd mortgages = 80% 88% are owner occupied 6

7 Mortgage Pool 2 Pool 2 has the following attributes: Loan Pool = $154,287,882 Number of mortgages = 1,194 (56 first mortgages and 1,138 second mortgages) Mean mortgage amount = $118,760 WAC = 11.51% WAM = 17 years (first mortgages at 25 year amortization and second mortgages at 15 year amortization) Mean LTV = 78.95% % in $ 1 st mortgages = 20% % in $ 2nd mortgages = 80% 88% are owner occupied Mortgage Pool 3 Pool 3 has the following attributes: Loan Pool = $174,627,948 Number of mortgages = 1,603 (77 first mortgages and 1,526 second mortgages) Mean mortgage amount = $118,760 WAC = 11.51% WAM = 17 years (first mortgages at 25 year amortization and second mortgages at 15 year amortization) Mean LTV = 77.66% % in $ 1 st mortgages = 20% % in $ 2nd mortgages = 80% 88% are owner occupied 7

8 Securitization Eample - Graph Pool 1 - Overview of Securitization Pool WAC = % Pool WAC = % Less: 6.500% paid to note holders Less: 2.250% swap, securitization & servicing costs Net annual spread: 2.753% Gross annual spread = 5.003% % Paid to note holders = 6.500% Net annual spread (profit) to Prime Capital = 2.753% 6.500% 5.003% Swap, securitization & servicing costs = 2.250% 2.753% % Securitization Eample - NPV Pool 1 - Overview of Securitization NET PRESENT VALUE OF EXCESS SPREAD WAC (Weighted Average Coupon) 11.52% Coupon - to bondholders 6.50% Cost to securitize (credit enhancement, swaps. etc.) 2.25% Net Spread after securitization 2.75% Num ber of Years Pool Outstanding 5 Discount Rate 10.00% NPV of Ecess Spread 10.44% NPV of Ecess Spread - added into income $ 7,818,316 8

9 Sample Rate Sheet 1st Mortgage 2nd Mortgage Base Rate 7.99% 11.99% Loan-To-Value Loan-To-Value Credit Grade % 85.00% % 80.00% % 70.00% Origination Fees 1st Mortgage 2nd Mortgage If Loan To Value is <=80% then the fee is: 1.00% 5.00% If Loan To Value is >80% then the fee is: 1.50% 5.50% Adjustments - LTV If the loan is a 2nd mortgage then the maimum LTV is reduced by: If the property use in not a single family residence then the LTV is reduced by: If the property use in not owner-occupied then the LTV is reduced by: If the property use is not in an urban area then the LTV is reduced by: If the income is not verified then the LTV is reduced by: 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Additions to Base Interest Rate If the property is not a single family residence then the interest rate is increased by: If the income is not verified then the interest rate is increased by: If the use of the property is not a principal residence then the interest rate is increased by: 0.50% 0.50% 0.75% 0.75% 0.50% 0.50% Sample Approval Summary File / Mortgage Number 2994BC CALCULATIONS Applicant - Last Name(s) Applicant - First Address City, Province, Postal Code SMITH Robert & Carol 5016 Plainview Road Burnaby, B.C. V5H 3E5 Enter one of the following in the cell to the right 1. Credit Class Maimum LTV based upon CREDIT CLASS If the loan is a 2nd mortgage then the maimum LTV is reduced by: If the property use in a Condo then the LTV is reduced by: If the property use in NOO then the LTV is reduced by: If the property use is not in an urban area then the LTV is reduced by: If the income is not verified (NIV) then the LTV is reduced by: 90.00% 2. Mortgage Requested Maimum LTV 85.00% 0.00% 0.00% 0.00% 0.00% 5.00% 3. Property Type SFD Duple Triple Quad Interest Rate Calculations SFD Condo Townhome Base Rate 7.99% If the property is not a single 4. Use of Property OO NOO OO family residence then the interest 0.00% rate is increased by: If the income is not verified then the 5. Location Urban Rural Urban interest rate is increased by: 0.75% If the use of the property is not a 6. Income Type Full NIV NIV principal residence then the interest 0.00% rate is increased by: 7. Market Value $725, Outstanding 1st mortgage (if applicable) $0 SUMMARY: Interest Rate: 8.74% Based upon the information provided, an application for a 1st mortgage has been tenatively approved. The loan amount is $616250, the interest rate is 8.74% and the the monthly payment is $ The total cost for the loan is $ Consequently, the net proceeds to be received upon funding is $

10 Start-Up Tasks first 6 months TASK Incorporate new company, trademark, etc. Meet with bank and rating agencies Enter and finalize agreement with securitizing entities Enter and finalize agreement with warehouse lender Research & select computer systems Formalize agreements with major consultants Purchase/lease equipment Select office space - Vancouver Select office space - Victoria Select & install underwriting system Select & install servicing system Sign Agency Agreements with regional brokers Temporary Staffing Recruit, select & hire underwriting staff Recruit, select & hire funding staff Recruit, select & hire servicing staff Recruit, select & hire collections staff Recruit, select & hire in-house appraiser Recruit, select & hire in-house lawyer Develop & implement web site Develop & print marketing materal Develop & implement radio advertising Develop & implement print advertising Commence sales calls to Vancouver mortgage brokers Commence sales calls to Victoria mortgage brokers Commence sales calls to BC credit unions Commence sales calls to financial institutions Sales calls - conventional mortgage providers Obtain regulatory approval Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Critical Success Factors Proven concept Growing demand for products Management team has successful track-record and unique skill set Etraordinary financial returns Potential for loss of capital loss is dramatically limited due to proven management techniques Fragmented, small competitors Ability to obtain government approval to commence operations Need less than 1.00% of total market share to achieve financial objectives 10

11 Foreign Investment At this time, it is important to note that a Korean pension fund that makes an equity investment in Prime Capital Corporation will not be subject to the onerous banking or foreign ownership restrictions of either the Canadian Bank Act or the Office of the Superintendent of Financial Institutions (OSFI). This is primarily because of two reasons: (a) although Prime Capital Corporation competes against Canadian Financial Institutions by offering mortgage credit, it has been structured so that it does not take deposits or operate in a trust capacity within the definition of the Bank Act; and, (b) a foreign pension fund is not designated as being in one of the three bank groups (i.e. Schedule I, Schedule II or Schedule III) because it is investing, not lending, in Canada. Consequently, a Korean pension fund can invest in Prime Capital Corporation and participate in corporate profits without the liability of etra taation levies or ownership limitations. Thank you. For further information, please refer to the Prime Capital Business Plan, dated December 1, 2007 or contact: Douglas B. Billingsley dbillingsley@shaw.ca Tel: (604) Stanley F. Lomas stanlomas@gmail.com Tel: (604)