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Post# of 87366
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neilhk

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neilhk

Re: neilhk post# 5399

Saturday, 10/20/2007 12:42:26 AM

Saturday, October 20, 2007 12:42:26 AM

Post# of 87366
Further point from latest PR of 19th October 2007:

Extract:

"Regarding the initial 21 clients who came to Heritage in 2004 and 2005, they provided a business plan and signed contracts for funding. Heritage is still waiting for signed agreements to acquire commercial asset projects, as required in Jane's part. Although none of the clients have been funded, some of them plan to honor their contracts and finish the application process to receive funding. Others do not."

The highlighted part from the latest PR tells us that the required action is from the borrowers side ( i.e. clients) and not Heritage to get these loans closed imo. Clients need to complete the signed agreements and return them to Heritage.

To fund the loans requires 2 key steps then after HCPC has carried out DD:

1. Funding source/ conduit lender to finance the loans until:
2. Institutional Investors purchase the securities (BCLOC Notes)


1. Funding Source/ Conduit Lender

We know that Heritage has a new funding source/ conduit lender who's role is to provide the necessary finance for the loans until the notes can be sold to the institutional investor. HCPC also plan to merge with this conduit lender in due course. It appears that it took some time for the conduit lender to be satisfied by the process/ business model as was mentioned in the Shareholders Letter of August 27th 2007, response to Qu.1. Extract follows:

"Second, the BCLOC represents a paradigm shift from traditional commercial lending philosophy that requires time and effort to gain the trust, acclamation and comfort of investors involved with a funding source."

The 'funding source' being the conduit lender imo.

2. Institutional Investors

We know that Heritage has one institutional investor waiting to purchase in excess of $300 million in BCLOC notes/ securities and we know these notes have a AAA rating (see shareholders letter of 27th August 2007, response to Qus. 3 & 5 http://heritagecapitalcreditcorp.com/Share_Letter_PR_82707.pdf ).

Extracts:

"Our affiliate executed a contract in 2005 with a rating agency to process “AAA” rated securities issued by its special purpose entity. This contract is currently in effect."

and:

5. Q: Is the institutional investor, stated in the press release on February 27, 2007, still providing the $300 million in funding for the purchase of the BCLOC Notes?

A: A potential funding source ( Note: i.e. the conduit lender ) has advised us that the special purpose entity (SPE) that issues the BCLOC Securities has made changes in the structure to reflect the current credit market conditions and expects to offer direct pay “AAA” rated notes versus collateralized debt obligations or CDOs. Further, they have advised that the restructuring is expected to allow the funding source to offer BCLOC Securities at a substantial amount over the $300 million previously mentioned in the press release.


Summary

So with the funding source/ conduit lender seemingly now in place and an institutional investor willing to purchase substantially in excess of $300 million in notes, it would appear that the funding side is now in place. The onus, it seems, is now on the clients to complete the application process and return the signed agreements to HCPC.

It maybe that they have not done this until they were assured that Heritage had the funding source/ conduit lender and institutional investors in place. I think this has caused the delays to date, both in finding a suitable funding source/ conduit lender and then the time taken for them to carry out their own DD before they were satisfied. The talk now of the proposed merger with the conduit lender certainly seems to support the view that the Conduit Lender is now 'on board' so to speak imo.

That being the case, the clients may now be willing to complete the application process and return the signed agreements. All the remaining 21 clients will not now proceed with the application and the loan pool will be less than $740 million as a result imo. However, the sum could still be very significant in terms if getting HCPC's business off the ground and more deals will no doubt follow in time.

GLTA









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