Complement your overall financial strategy with customized lending

Transcription

1 Complement your overall financial strategy with customized lending

2 Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer and Member SIPC, and other subsidiaries of Bank of America Corporation ( BofA Corp. ). Banking and lending products are provided by Bank of America, N.A., and other banking subsidiaries of BofA Corp., Members FDIC. Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

3 Complex financial needs require a customized approach You know that a true picture of wealth goes beyond the securities you own. It includes the borrowing power of your assets. Your Merrill Lynch financial advisor can connect you with credit specialists at Bank of America who can help you find opportunities on both sides of your balance sheet. Merrill Lynch provides investment experience, and Bank of America is distinguished by its ability to customize credit strategies to your unique needs. Both can offer a range of solutions that recognize the complexities of your wealth. Together, your financial advisor and credit specialist will work to understand your personal and business goals. Then they can create a strategy designed to help you accomplish the things that are most important to you, keeping in mind your time frame and your current finances. Example scenario 1 : Generating liquidity to make a business investment Situation A hedge fund investor was looking to invest in a startup business. The investor wished to maintain his hedge fund exposure and didn t want to liquidate his marketable securities. He asked his Merrill Lynch financial advisor for advice about possible financing strategies to fund his investment in the business. Result The client s Merrill Lynch financial advisor introduced him to a Bank of America credit specialist, who met with him to understand his goals. The credit specialist analyzed the client s balance sheet and cash flow as well as the hedge fund s liquidity and redemption policies. After understanding the client s needs and financial situation, the credit specialist was able to structure a multiyear revolving line of credit secured by the hedge fund position. The client used the loan proceeds to invest in the startup business and to purchase a commercial building, which he leases to the business. Note: Merrill Lynch financial advisors don t provide recommendations regarding customized lending products from Bank of America, N.A. However, your financial advisor will be happy to refer you to a Bank of America credit specialist, who can work with you regarding options to address your credit needs. You should consult your independent advisors before making any decision to obtain a credit product from Bank of America. 1

4 Use credit as a wealth management strategy The prudent use of credit can have a positive effect on your overall balance sheet. To help you address your short- and long-term cash flow needs, your Merrill Lynch financial advisor can engage a Bank of America credit specialist. Together they ll suggest customized credit strategies that won t disrupt your overall financial strategy. The ultimate goal is to design a customized credit approach that meets your needs. That s where the bank s credit professionals come in, adding a critical dimension to your overall strategy. A credit specialist will discuss areas that could be strengthened with additional liquidity, uncover opportunities to finance new ventures or purchases, and consider hedging strategies to protect your assets against rising interest rates or market swings all without disrupting your investment portfolio. Tailored to fit your needs: Bank of America financing solutions Credit specialists will work with you and your Merrill Lynch financial advisor from start to finish. Resources include marine, aviation, fine art, hedge fund, derivative and real estate subject-matter experts. Credit facilities are tailored to your time frame, cash flow needs and collateral types. Bank of America has the ability to offer attractive loan structures, competitive rates and flexible terms. Credit specialists are empowered to make decisions at the local level, which results in highly responsive underwriting. Credit facilities are provided by Bank of America, N.A., or other subsidiaries of Bank of America Corporation. 2

5 Your priorities are what matter Complex financial situations require more than a standard credit offering. That s why Bank of America can provide an approach to credit, liquidity and risk management that seeks to meet a full range of goals, broadly grouped into five main areas: Liquidity financing seeks to bridge cash flow needs for those whose sources of income are irregular or inconsistent, such as business owners. You may not want to liquidate investments and realize potential losses or tax consequences. Your credit specialist can tailor a source of liquidity to your unique situation so you have the funding you need for personal or business goals. Investment financing can facilitate the purchase of businesses, commercial real estate properties, securities or alternative investments. Your credit specialist can help you fund a tactical allocation* to real assets that may strengthen your balance sheet by producing consistent income. * Asset allocation does not ensure a profit or protect against loss in declining markets. Lifestyle financing encompasses strategies for funding the purchase of a yacht, airplane, artwork, vacation home or recreational property such as a ranch or vineyard. Specialists with considerable experience and contacts in these niche markets can help you finance these lifestyle enhancements without disrupting your long-term investment strategy. 2 Wealth transfer financing can be used to help accomplish your long-term estate planning objectives while preventing or deferring the liquidation of your assets. Your credit specialist can offer liquidity strategies that leave your properties, securities and other assets intact. You can also provide for your heirs while deferring estate and transfer tax consequences. Risk management offers strategies to minimize the effect of rising interest rates on your balance sheet. Your credit specialist can also design strategies to reduce the risk of asset concentration and will review your portfolio and design custom derivative products to help hedge against exposures that concern you. 3

6 Benefit from an approach to credit that s right for you Perhaps you have additional goals, like taking advantage of business opportunities that may come your way. Or you might need available cash to acquire an asset you have your eye on. Whatever your goals are, every conversation about customized credit begins with the following questions: If you could access more of the cash you need, how would you use it? What assets would you purchase if the terms were attractive? If you were to sell a valuable asset, what would you do with the proceeds? If you hold a concentrated stock position, are you bullish or bearish about its prospects? As you think about your portfolio, what risks concern you? If you have an existing loan, are its terms and structure best suited to your situation? Once you ve thought about these big-picture questions, your credit specialist can take you through a five-step process: 1. Assess your needs. Your credit specialist will work to understand what you re trying to accomplish, talk about the structure of your current cash flows relative to your needs, and consider longer-term liquidity goals you may have. And he or she will examine anything that may expose you to additional risk through your holdings. 2. Review your balance sheet. Next, your credit specialist will analyze the makeup of your assets and the extent of your liabilities. You may own assets through entities such as trusts, family limited partnerships or limited liability companies. Certain assets may have untapped potential to generate cash flow when pledged as collateral. Your liabilities may include debt that could be restructured at more attractive terms. 4. Put your customized credit strategy in place. Together with a team of risk and underwriting partners, your credit specialist will design a unique strategy that addresses your goals. They ll review available collateral and weigh the considerations of each. The aim is to achieve optimal terms while aligning your planned use of funds with the duration of the credit facility. 5. Review your ongoing credit needs. Your credit strategy may need to adapt as your life circumstances change. If you find that your needs change over time, your credit specialist can be a resource to discuss how credit can help complement your current circumstances. Factors to consider when crafting your customized credit strategy 1. What are your short- and long-term personal goals? 2. What are your short- and long-term business goals? 3. How do you plan to use the funds from the loan or line of credit? 4. When do you plan to repay the loan? 5. How would you prioritize the following loan features? Interest rate Term of loan Loan amount Loan structure Timing to close 6. Do you expect interest rates to rise or fall during the loan term? 7. What cash flow do you anticipate receiving during the loan term? 3. Define and refine your approach. As your credit specialist reviews your balance sheet, he or she will consider a number of different strategies. These may include secured and unsecured debt, revolving or term lines of credit, derivative products, securities-based loans, mortgages, or some combination of these. Your credit specialist may also suggest using your available cash instead of borrowing. He or she will also discuss the risks involved in these strategies. Customized lending may not be for everyone. 4

7 Example scenario 1 : Reducing borrowing costs of real estate Situation A real estate client owned an office building and a retail center that produced stable income. Both properties had a prime-based floating-rate loan at a local bank. The client felt confident about the upturn in the U.S. real estate market, and she determined that she would hold the buildings for the foreseeable future. She asked her Merrill Lynch financial advisor about ways to reduce her borrowing costs. Result Her Merrill Lynch financial advisor connected her with a Bank of America credit specialist. Since the client had no immediate plans to sell the properties, the specialist recommended extending the term of the loan. He offered her a five-year LIBOR-based commercial real estate loan at lower rates than she had been paying. The client was able to save money and draw more income from her real estate. 5

8 Get financing that makes sense for your situation You already receive Merrill Lynch s investment advice and guidance. Bank of America has considerable experience creating customized credit strategies using complex collateral such as marketable securities, real estate, hedge fund positions, yachts and aircraft, as well as royalty streams from certain intellectual property. Your credit specialist can draw upon Bank of America s resources to offer customized lending across the following areas: Marketable securities. Leverage your marginable or nonmarginable securities, including convertible partnership units or Class B super-voting shares. The bank can consider higher or nonstandard advances on equity positions. Hedge fund positions. The bank s experience in hedge fund lending allows us to advance credit to hedge fund investors and certain hedge fund managers. You can maintain your investment while accessing the cash you need. Investor commercial real estate. The bank can lend against income-producing real estate such as industrial properties, hotels, multifamily buildings and retail spaces. Loans may be structured as term loans or lines of credit, allowing you flexibility and a lower cost of investment capital. Bank of America, N.A., can also assist real estate developers and other real estate entities. Recreational real estate. If you re looking for equestrian properties, vineyards or ranches, credit specialists can tailor customized financing strategies to your current requirements and goals, such as cash flows or an expected liquidity event. They can also help you leverage the equity in your existing property for improvements, expansion or investment in other assets. Custom residential real estate. If you re a business owner with nontraditional cash flows, residential real estate specialists can work with you. The bank offers jumbo mortgages for luxury properties. And it can finance unique property ownership structures, including home purchases by limited liability companies. 3 Fine art collections. Unlike other lenders, the bank doesn t require clients to warehouse their art while borrowing against it. As one of the larger art lenders, 6 the bank has relationships with fine art appraisers to help ensure a smooth loan process. Yachts. You might want to finance the purchase or retrofitting of a yacht, or need help with broader issues pertaining to the ownership of marine vessels. In that case, the bank has experienced marine finance specialists and can provide foreign currency funding, and hedging, for construction in non-u.s. shipyards. Aircraft. The bank s Global Corporate Aircraft Finance division can arrange for funding through loans or leases for personal or corporate aircraft. These specialists offer broad knowledge of aircraft financing options and can share their industry expertise on topics such as valuation and various forms of ownership structures. 4 Unsecured lines of credit. Well-qualified clients can take advantage of the bank s general unsecured lending. For corporate insiders with substantial personal liquidity and cash flow, unsecured lending may be an attractive strategy when corporate policy prohibits company stock pledging. Equity derivatives and interest rate hedging. The Investment Solutions Group delivers risk management strategies for both sides of your balance sheet and income-generating strategies for marketable securities. For concentrated stock positions, the group customizes strategies to hedge, monetize and diversify concentrated equity exposure. These include collars, prepaid forwards and exchange funds. If you want to manage interest rate exposure in your investment, business or real estate portfolio, the group provides interest rate swaps, caps and swaptions. Intellectual property. Credit specialists are able to monetize nontraditional collateral such as streams of income from music catalogs, film rights settlements and other artistic properties.

9 Example scenario 1 : Using a luxury asset as collateral Situation A client found an attractive waterfront vacation property that required a quick closing. He asked his Merrill Lynch financial advisor about obtaining a mortgage. His financial advisor pointed out that, since the client owned a yacht without any debt, he might be able to borrow against it more quickly than obtaining a mortgage. Result The Merrill Lynch financial advisor introduced the client to a Bank of America credit specialist who worked closely with the Marine Finance Group. The group designed a three-year revolving loan, secured by the yacht, which was sufficient to fund the vacation home on a timely basis and provide additional liquidity. After completing the home purchase, the client decided to refinance the home with a traditional mortgage from Bank of America s home financing solutions. 7

10 Credit can play an important role in what you want to achieve To complement the investment advice and guidance from your Merrill Lynch financial advisor, a Bank of America credit specialist can create highly customized credit strategies to address your complex needs. Talk to your financial advisor to gain access to experienced professionals who can evaluate the role of credit in helping you achieve your goals. 8

11 To learn more about how customized lending can fit into your financial strategy, please contact your Merrill Lynch financial advisor.

12 1 The example scenarios presented are hypothetical and do not reflect specific strategies that may have been developed for actual clients. They are for illustrative purposes only and intended to demonstrate the capabilities of Merrill Lynch and/or Bank of America. They are not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Results will vary, and no suggestion is made about how any specific solution or strategy performed in reality. These products and services may not be appropriate for all clients; each client s needs, circumstances and financial status are different and will be evaluated independently. 2 Customized lending may involve special risks and may not be appropriate for all clients. In particular, structured lending may be subject to additional credit and legal approval because of special risks and restrictions that need to be carefully considered. Real estate financing and specific program options and property types may not be available in all states and may be subject to change from time to time. As a general rule with respect to each client, consideration must be given to capital gains tax implications, portfolio makeup and risk tolerance, portfolio performance expectations, and investment time horizon. 3 Custom Residential Real Estate: Borrower-paid attorney fees apply. Minimum borrower liquidity of $3,000,000 or $5,000,000 net worth (including primary residence), and $750,000 post-closing liquidity. Other restrictions apply; ask for details. Custom residential real estate financing may involve special risks and is not suitable for everyone. Please obtain advice from your third-party legal, tax, insurance and accounting advisors before changing or implementing any financial, tax or estate planning strategy and to determine what custom residential real estate solution might be right for you. Merrill Lynch, Pierce, Fenner & Smith Inc., does not make commitments for or fund loans. Bank of America, N.A., (the Bank ) does not serve in a fiduciary capacity with respect to all products or services. Fiduciary standards or fiduciary duties do not apply, for example, when the Bank is offering or providing credit solutions, banking or custody services or referrals to other affiliates of the Bank. 4 Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation ( BofA Corp. ). Lending, derivatives, leasing, equipment finance and other commercial banking activities are performed globally by banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC. Securities, strategic advisory and other investment banking activities are performed globally by investment banking affiliates of BofA Corp. ( Investment Banking Affiliates ), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated ( MLPF&S ) and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, MLPF&S and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are Members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. Neither Bank of America nor any of its affiliates provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Derivatives are complex instruments that are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Clients must be options-approved. Hedging and monetization strategies can result in higher return potential but also higher loss potential. Prospective investors are required to meet certain qualifications and acknowledge they understand the risks associated with certain hedging and monetization strategies that may not be suitable for all investors. The investor in a hedging strategy such as a prepaid variable forward risks losing a portion of the price paid for the hedge if the market does not move favorably. In order for a hedging strategy to be profitable, the investor must be right about the direction of the anticipated price change and also the timing of when the price change will occur. The costs of a customized prepaid variable forward solution are significant. These types of securities involve a high degree of risk, and investors should consult with their advisors to confirm that this strategy is appropriate for their portfolio. Credit facilities are provided by Bank of America, N.A., Member FDIC, its subsidiaries or other bank subsidiaries of Bank of America Corporation, each an Equal Opportunity Lender. All loans and collateral are subject to credit approval and may require the filing of financing statements or other lien notices in public records. Asset-based financing involves special risks and is not for everyone. When considering an asset-based loan, consideration should be given to individual requirements, asset portfolio composition and risk tolerance, as well as capital gains, portfolio performance expectations and investment time horizon. A complete description of the loan terms will be found in the individual credit facility documentation and agreements. Clients should consult with their own independent tax and legal advisors. Securities-based financing involves certain risks. We can help you take into account your individual requirements, portfolio composition and risk tolerance, as well as capital gains taxes, portfolio performance expectations and investment time horizon. Securities-based financing may not be suitable for all clients. The loan is secured by assets in your Merrill Lynch account(s). Market fluctuations may result in a collateral call, and you may need to deposit additional cash and/or securities to meet the call or risk liquidation of your securities at an unfavorable price. In some cases, the securities pledged as collateral may be liquidated. Among other things, this may have negative tax implications for you, especially if the liquidation price of the securities liquidated exceeds your basis. The firm can sell your assets to meet a collateral call without notifying you, and you are not entitled to choose which securities in the account will be sold. You are not entitled to an extension of time to meet a collateral call. Banking, mortgage and home equity products offered by Bank of America, N.A., and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation. Equal Housing Lender. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice Bank of America Corporation. All rights reserved. AR74XF7G MLWM-177-BRO PM-0618 Made with 10% post-consumer waste (PCW) recycled paper. Leaf icon is a registered trademark of Bank of America Corporation. 1