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Conduit Lenders: Further thoughts on possible merger partner for HCPC
The previous post quoted an extract from the following website:
http://www.commercialbanc.com/conduit-loans-102.html
"Within the capital marketplace there are a number of conduit lenders, including, life insurance companies, pension companies, financial services firms and some of the nation's largest banks and investment banks.
We know from the WallSt.net interview (and the shareholders letter) that HCPC's longer term plan is:
"Plan to merge with a conduit lender to give the company direct access to more capital and different structures. This merger is expected to help us carry out and get to our plan to organise a bank."
Given that fact, it is unlikely then that the merger partner would be an existing bank....they want to form/ organise one, not merge with one imo:) From the conduit lender candidates mentioned above, I would think we could narrow the potential merger company/ conduit lender to being one of the following:
1. Life Insurance Company
2. Pension Company
3. Financial Services Firm
HCPC did PR a potential merger partner last year with a London Insurance Company.
http://heritagecapitalcreditcorp.com/sitebuildercontent/sitebuilderfiles/hcccsignsletterofintenttome....
The merger did not proceed as originally planned:
http://heritagecapitalcreditcorp.com/sitebuildercontent/sitebuilderfiles/hcccprovidesupdates.pdf
Extract as follows:
"After a six month due diligence period, it was determined that the merger was not beneficial for the companies."
Although this particular merger did not proceed, it would still appear then that a merger is still very much part of the bigger picture for HCPC. If HCPC has developed innovative products (such as the BCLOC loan) that have good potential in the current marketplace, it would make sense that they would see a mutual benefit in a merger with a larger financial institution to realise that potential by scaling up their operations imo.
GLTA
Conduit Lenders: Following website provides a bit more info
http://www.commercialbanc.com/conduit-loans-102.html
Extract:
"Within the capital marketplace there are a number of conduit lenders, including, life insurance companies, pension companies, financial services firms and some of the nation's largest banks and investment banks. Conduit lenders generally hold the conduit loan only until it can be securitized, typically 2 years.
In a securitization, there is sale of interests in the conduit loan ( Note: Sale of interests in the case of HCPC being the sale of BCLOC Promissory notes to Institutional Investors/ Funding Source) and an assignment of the loan within a few weeks or months after the closing to an institutional trustee."
So it seems the conduit lender acts as an intermediary to fund loans initially, to enable them to be securitised before their sale to the institutional investor (i.e. funding source). In the case of HCPC securitised would be the sale of the BCLOC Promissory notes to the institutional investor/ funding source.
The range of institutions that act as conduit lenders mentioned above, suggests to me that they could also be the funding source HCPC have referred too but equally the funding source could be another institutional investor. Without more information from HCPC we can't be sure at this stage.
We do know, however, when they mention conduit lender, the type of company that HCPC could be planning to merge with imo
GLTA
Certainly would like to hear more about the funding source and whether they have potential for more than one source, to spread risk.
I've been going though some documents to find references to the funding source and also the conduit lender with which they mentioned that they intend to merge. If anyone has any thoughts on the funding source/ institutional investor and the conduit lender I'd be interested to hear them, especially whether you think they are one and the same or different entities.
References to Funding Source
From Shareholders Letter of 27th August 2007:
"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."
"A potential funding source 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."
PR referrred to above is as follows:
http://heritagecapitalcreditcorp.com/sitebuildercontent/sitebuilderfiles/pressrelease22707_allocatio....
From recent WallSt.net Interview: Funding Source
"We have a new funding source and that funding appears to be imminent."
Longer Term Plan: Conduit Lender
"Plan to merge with a conduit lender to give the company direct access to more capital and different structures. This merger is expected to help us carry out and get to our plan to organise a bank."
GLTA
Well we know that they don't have revenues until they close loan deals. Carol and her husband have already put $2-$3 million of their own money into the business. I think that delays in closing deals have forced them to dilute/ increase the OS in order to get to deal #1. If successful, they have the cash on hand to rectify the situation.
The recent PR, detailing the terms of the buyback, states as much.....that whatever the OS is now, when they have funds available they will repurchase stock. In that respect, what the target OS is in future is the critical factor imo. I certainly don't mind holding my shares whilst they rectify the share structure.
If they close the loans they have already in the pool, or a good % of them, then we will be looking very good. They will no doubt start marketing the BCLOC loans in earnest once things are rolling to generate more business (PR company Gregory FCA are on hold at present but will be a key player in assisting HCPC in this regard imo).
They also propose three other loan products to be rolled out next year, in addition to generating more BCLOC loan business. As yet we don't know the potential of these as revenue streams for the company, but they could be significant in future imo. We also have a funding source that they have mentioned with which they propose to merge, gaining greater access to capital, with the aim of forming a bank..........all this adds up to huge potential and only time and events will tell if it plays out as expected imo.
If HCPC can just close some loans in the near future (and so validate the business model) and produce revs for the first time.....everyone will be happy imo:) After that step, things could get very interesting here imo.
GLTA
pickspicks1: Completely agree. They have alluded to the closings as imminent in the recent shareholders letter, the interview and again in the latest pr this week. They certainly need to deliver on these loan closings now, no buyback will commence until they do....the PR stated the buyback was triggered by loans closing and revenues generated.
Loan closing/ revenue generation is the key. Carol stated that in the interview that everything is dependent on that one milestone. I am just waiting now for that pr stating that they have closed the first deal (s).
GLTA
Pickspicks1: Just one further point. As mentioned in my previous post the OS/ Float will have increased significantly, driven mainly by the needs of short term financing by the company. We know this has been a necessity for them until they can generate revenues. The share price is where it is as a result. However, if they close deals and repurchase significant quantities of those shares as they propose, to reduce OS and increase the pps, we may have a unique short term buying opportunity at the moment imo.
GLTA
FIFG Website under reconstruction
http://www.firstifg.com/index.html
Just clicked on the above link and received the message that the website is under reconstruction. This is an affiliate of HCPC and the major shareholder.
From recollection, it also looks like there have been some recent amendments to the ICCC website, the subsidiary of HCPC:
http://independentcapitalcreditcorp.com/
Looks like things are happening behind the scenes at present.
GLTA
Pickspicks1: At present we only get an update on share structure (and hence any new RegD dilution or otherwise) when they file their quarterly statements. We will definitely know what has occured up until September 30th (only, unfortunately) when they file the latest statement imo. I do a review of the share structure each quarter and file the changes and findings in the DD box above.
I agree though that they should allow this information to be given to us by the TA. I have written several times to them on this point. May be a good question/ point for the shareholders meeting......anyone going please ask.
They have stated that they are currently funded by sales of shares.....on the website, repeated in the shareholders letter etc. They have been very open about that.
In terms of whether we are experiencing dilution at present I really could not say for sure or whether it is just 'churning' of shares. I do know that the OS/ Float will have increased a lot since the 'early days' you referred too. I've certainly factored that into my thinking but still see upside potential well above my initial buy in price earlier this year. This is all dependent on them closing the first deals and following through with the others of course.
GLTA
3rd Quarter Statement/ Financials (for period ending September 30th) will be filed 'mid-October', according to the website.
This info could be made public either before the shareholder meeting on the 18th, ie. next week or just after imo. Either way we should soon find out more about the share structure, RegD sales and any changes to insider ownership etc for the period up until September 30th 2007.
GLTA
Yesterday's PR basically formalises the arrangement for the share buyback (i.e. 35% of its income following each project funding to buy back stock) that was first mentioned in the recent shareholders letter of 27th August 2007 as follows:
"12. Q: What are the plans for the Company after the BCLOC LOANS are funded?
A: The Company plans to use a portion of its earnings to redeem shares and the balance to form a bank and continue to originate BCLOC loans through that bank. It should be noted that Heritage was founded in 1994 for the purpose of forming a bank."
In that letter the company also stated that, " Management believes it can deliver more than $740 million in projects for funding before year-end." In addition, with regard to funding they stated in the letter that, " ......expected to allow the funding source to offer BCLOC Securities at a substantial amount over the $300 million previously mentioned in the press release."
If, as and when the first loans close we should hear more about the funding source. This could be the 'Funding Conduit' that they referred to in the WallSt.net interview, that they plan on merging with in the future. The purpose of that merger is to allow greater access to capital and to facilitate their goal of becoming a bank.
In the PR yesterday they again stated, " Revenues are expected to be generated by year end."
In the WallSt.net interview Ms. Johnson mentioned twice that the funding for these loans was in her words 'imminent.'
Once the revenues are generated, the buyback begins, Gregory FCA (the PR company) will become actively involved and I would then expect moves to make HCPC fully reporting and a move onto the OTCQX Prime as an initial uplisting move, as they have stated are their goals for 2008 in the WallSt.net interview.
The shareholders meeting is next Thursday (18th). It's a fantastic opportunity for those going to ask these questions again face to face. The fact that HCPC are opening themselves up to meeting shareholders directly is a great sign imo. Why would they put themselves in that situation unless they have substance to their claims? There is no requirement for them to hold such a meeting. They are doing it of their own accord. From my own personal point of view, if I were running the company and knew that the deals could not be closed, the last thing I would do would be to go to all the trouble and expense of arranging a quality venue, mailing all shareholders of record and then have to meet them face to face. That just doesn't make sense imo.
Time will tell if the events that they have set out of late will unfold as planned. If they do the upside will be huge imo. As Carol Johnson stated at the end of the WallSt.net interview,...." it's all dependent on one milestone which we believe is imminent.'
Time will tell.....and we should know quite soon now imo.
GLTA
nhguy: Good post. We are in a very unique position here with regard to upside potential.....your post sums it up well. That is why they mention the possibilty of a reverse split in today's PR if it helps uplisting to a higher exchange...if the figures do play out as they have projected, then it could well be in reach....OTCQX Premier requires a minimum share value of $1.00 and AMEX requires $2.00 minimum. More info on AMEX in the following post. More info on OTCQX in i-box for those interested.
http://investorshub.advfn.com/boards/read_msg.asp?Message_id=19005509&txt2find=amex
All this is subject to 'IF' and when they close the loan deals. They have said that they will in the shareholders letter, in the recent interview on WallSt.net and again in this PR. We have a shareholders meeting soon (October 18th) which some people from this board will attend. I am sure that will be very useful for those who go to pick up the 'vibe' of what is going on and what will unfold. The company is being much more open of late and seems very bullish....but they need to follow through with these closings now, as some have pointed out, there have been delays before in the anticipated timeline.
I think they will produce the goods. They have so much at stake in terms of their personal investment of money and time in this venture, and so much to gain by making a success of it. Do your own DD and good luck to all:)
GLTA
Well you can select individuals or all. At this stage I am content that all three are elected. The two in addition to Carol are HCPC shareholders with relevant skills. They certainly have a vested interest imo.
However, I think once the first loans are closed and the business model is validated, we may well see some bigger players coming on board as well. I did hear that they had some 'real quality' lined up. If this is true, I think these people will wait for the business model to be proven before committing themselves to HCPC and coming on board imo....
GLTA
Well the pieces are definitely coming together.......I added some more this morning and have to wait a couple of days for some more funds to clear......it's been a slow process getting to this stage but I think that patience will pay off in due course.....for us all.
Shareholders meeting on the 18th October as well...we could possibly see more news before then imo
GLTA
Also really like this bit:)
"Shareholders have been asking if the Company is planning a stock reverse split. At this time, that is not in the plan. However, in the future it may be considered when a strategy is developed for moving up to a national stock exchange."
To get to a national exchange would warrant an RS imo...if that's what it takes....reduce shares, increase share value and get off the blessed pinks.....will have to see how things unfold...
GLTA
Great news:) The PR clearly states "Revenues are expected to be generated by year end." They are obviously confident enough that loans will close shortly, hence the buyback plan they spoke of in the shareholders letter. They also mentioned loans closing by year end in the interview.
GLTA
Very interesting......suggests maybe that 'someone' is trying to cover or that they don't have so many shares now imo. Seems to have been a lot of accumulation of late.
GLTA
Not much chance of that imo. Just had my voting form emailed to me by the Carol.....and people have already started making their reservations. But hey this is the pinks..right....anything can happen:)
Good luck to you too....
GLTA
The OS is probably 500 million max imo.....will find out soon when the financials are posted, be interesting to see if they come out before or after the meeting. The meeting was re-scheduled deliberately from June of this year, so they must have reviewed timeframe and upcoming events beforehand imo. The shareholders letter and recent interview both implied that key events will happen before the year end. The fact that they are arranging a shareholders meeting at all for me is significant. Why go to all that trouble if there is no substance to talk about?
Any news of loans closing will send this north and with the earnings figure projections made by the company, the share price would be a steal at these levels imo.
GLTA
Agree, things seem to be falling into place. Website updated and shareholders meeting in a couple of weeks.
I received my shareholders meeting notice by email this morning (they are also sending by airmail as I live overseas). Shareholders of record should receive theirs soon......completed proxy's need to be returned to HCPC by Friday October 12th by fax or mail.
GLTA
Possible news coming out before shareholders meeting, which could be discussed at meeting, could include any of the following imo:
1. First Loan (s) Closing/ Funding secured from new source. As you mentioned, they stressed at least twice in the interview that this was imminent.
2. Additional Directors to be elected
3. Information on 2006 audit
4. Uplisting plans to OTCQX
5. Merger plans with funding conduit
Think the key news for us and them would be item 1 above, which would be the 'trigger' for items 4 and 5 in due course imo. Items 2 and 3 are also possible as these have been mentioned in earlier pr's this year.
GLTA
Shareholders Meeting: Good location...wish I was going....:)
http://www.dupont.com/hotel/about_overview.htm
Good point....the statement in the pr, "2. To transmit such other business as may properly come before the meeting"does seem to suggest that something is in the pipeline......the fact that they are holding a shareholders meeting in itself, gives me confidence imo. If they had nothing major to discuss, or no good news on the horizon why bother going to the time and expense of arranging one and open yourself up to the wrath of the shareholder? I think there will be developments scheduled for before the meeting imo...
GLTA
Well hopefully we can get the focus back more on HCPC now.....DD, discussion and commentary.
There will be lots more news to discuss shortly imo. As mentioned before, if the company delivers we will be ok.
All the best for now.
GLTA
The positives as I see them are that we do have a lot of new longs with significant shareholdings who see the same opportunity we saw a few months back. They are holding for the news that we expect in due course. Boardmarks are up in the 90's and we are on more people's radars as a result. Some people will be waiting in the wings to see how things unfold. The interest that came to this board was inevitable imo. There are many different types of traders/ investors all with own style. I just accept that as part of the package.
I think things will calm down a bit now, certainly hope so and we can find some middle ground between the extremes of late.
In the end all this will come to pass. The real issue is the company and the closing of the loan deals. If they follow through as planned then will be fine imo.
GLTA
bsandy: couldn't agree with you more.........
If they'd done their DD they would know that no loans had been closed as yet. That is why the potential is still here. They would know they had 26 clients. They would know that 5 had complained about the time taken to close loans/ get funding. They would know the company had responded by a PR.
When you look at the TV report there are fundamental questions I ask myself:
The woman who 'lost everything' paid $45k in application fees for a loan of $47 million. Quite a large loan for what appears a family business affair, but we'll leave that one for now. Previously, the family had 8 investment homes. Well if they were investment homes they should have been self-financing then imo or they are not investment homes if they cannot meet repayments from income (if only if that is the interest payments on mortgages). So why did they lose them all and their family home as well? Before the loan application I assume they would had sufficient funds/ income to meet costs for the 8 homes and their own home. If the loan application meant they couldn't meet repayments for whatever reason they should not have committed those funds in the first place imo.
In the worst case scenario, if they got into real financial difficulties and needed bridging finance they could probably have sold one or two homes...surely that would have raised $45k? etc etc. I am not saying that is an ideal situation, but unless all their properties were financed by 100% mortgages and had not increased in price at all, there must surely have been some equity in them? In truth, we don't know all the answers, but all I am saying is that maybe there were other factors that caused their real financial problems, but were never touched on in the report. It was all a bit simplistic imo. An application fee does not guarantee a loan. You still have to qualify by meeting certain criteria. If the price of the application fee for a loan to take you from a family business with 8 investment homes to one with $47 million at your disposal can send you under, then don't do it ...simple as that imo
As I mentioned in a previous post, I understand HCPC presented details of where they were at in terms of closing the loans. This was not included in the report either. Why?
In the end, as I said before, it all comes down to whether the company can close the loans or not. All else in just our personal opinion at this stage. I still think they will come through and deliver. Time will tell.
GLTA
They don't get any funding from the Fed.
GLTA
5 out of 26 clients complained about the delay in financing. The company responded to the complaints in the correct way:
http://heritagecapitalcreditcorp.com/sitebuildercontent/sitebuilderfiles/hcpcpr_refund_73007-final3.....
That means 21 clients have not complained, which suggests to me that maybe they are prepared to wait for financing because of the significant benefits of the company's BCLOC loans vs conventional CMBS loans imo
Imo the company has not spent nearly c.4 years in development, invested c.$3 million of their own money, to be down on paper by over $2 million (and btw not sold a single share) on some get rich scheme involving application fees or by selling RegD shares. They no longer require application fees for future applicants btw.
The DD I have carried out to date has shown that their personal investment is down significantly at present. Whilst that does not prove anything conclusively, it seems to support my own personal view that they are a legit company that has just struggled to get the loans funded as quickly as they originally envisaged, due to various delays and the fact that the BCLOC is a new and innovative product. This in turn has meant they have had to raise additional finance through the RegD's/ private placement...hence the fall in pps over the last few months. The company will make a fortune by locating funding for the the loans...not by collecting application fees.
I have also been advised that the company presented detailed info to the reporters on the current status of the loan closings.....but this was omitted from the 'report'.
In the end, what I think is irrelevant. The only thing which is relevant is whether the company can close the first deals, which as they stated in the WallSt.net interview last week, they think they can and that the closing/ funding is imminent. If they can then all the claims and potential can be realised imo.
GLTA
Good point, that certainly wouldn't surprise me at all. By the sounds of things ( last weeks interview/ shareholders letter) there is a lot of news on the horizon......anyone in the know would be adding imo.....
Chart looks great. The other point I like is the fact that the 20 day MA, which has acted as overhead resistance for several months now, has levelled out with the close on Friday's above it. This is bullish imo and it wouldn't take much now for this average to turn back north imo. Another sign that the long downtrend has weakened and a new uptrend could be about to/ has already started imo. Looking forward to the week ahead for sure.....
GLTA
Good point:) The other thing I note (on a very basic charting level) is that we seem to have a higher low forming......well you all know what we have when we have higher lows and higher highs..........could this then be the start of a trend change?
GLTA
HCPC: For those of you new to the stock and for those that have come here based on the strong technicals/ chart set up but don't know the background to the company, the following may help (more also in i-box above). I have a great interest in charts/ technical analysis, but I am certainly no expert. But I also look for the underlying story that will drive and sustain an uptrend. I think we have the makings of that here, with great upside potential based on anticipated earnings (CEO mentioned 8 cents share pre-tax earnings which equates to c.5 cents net). Worth taking a bit of time, therefore, to understand what you have our hands on and the potential it has in the short/ medium as well as the longer term imo.
HCPC: Background DD
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23015307
CEO Interview with Wall St.net on 20th September 2007: Notes
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23057408
Up to 97 boardmarks:) Will be triple digits soon.....
GLTA
I have also heard through the 'grapevine' that the company presented information on the current status of their loan closings to them.....but it was not included for reasons best known to the 'reporters'...hence the unbalanced nature of the report....enough said.
GLTA
xbootienow:
The average PE for the following industries are as follows:.
Mortgage Investment 13.5
Credit Services: 14.7
Regional North East Banks 17.7
One obvious benefit then of HCPC's intention to form a bank is the improved valuation it would receive.
The estimate I prepared used a PE 4 and as you rightly stated, the intention was to keep things 'real'....for now at least.
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23068375
When HCPC shows that they can generate repeat loan business, expansion into other financial lending fields, achieve full reporting status, uplisting, development towards and into a bank, etc, that valuation will obviously come more into line with industry averages.
That's why the longer term has so much potential imo. The key as they stated in the interview is the first milestone of funding the first $740 million in loans, which would earn them 8c/ share pretax and 5c/ share net. Assuming they are successful with that step, it is just the beginning imo.
What if they then achieved funding of say $2 billion BCLOC loans the following year on the back of a higher profile marketing campaign (developed in association with their PR consultants Gregory FCA) and by that stage had achieved reporting status and also uplisted, if only to OTCQX.? Net EPS would then be c.15c/ share assuming no change to the share structure (although we also know they propose a buyback when funding of the first loans is delivered and revs generated). A higher PE could be applied....maybe 8-10. It doesn't take much imagination to see that this could grow very quickly. Maybe a move in time then to AMEX? And they also talk about other products being introduced next year......Tuition Loans, more conventional Commercial Loans and Residential Mortgage Loans. With that additional revs should also be generated.
Then throw into the equation the proposed merger with the funding conduit in the development of the business to form a Bank and then the future growth potential could be huge.....and so on.
Before I get too ahead of myself though, the first step is the funding of the $740 million in BCLOC loans. They state in the interview that they have a new funding source to finance the loans......and that closing is 'imminent'. If that is correct, the revs generated from it will put things in motion and the above scenario I outlined is then a definite possibilty imo. With it then comes a much higher valuation than I originally stated in my earlier post above imo.
Suggest people do their own DD. The opportunity and the potential is here........imo
GLTA
Agreed, a lot of smart people here today with a lot of peoplemarks.....will be plenty of people catching onto this over the weekend imo.
GLTA
That's what I'm thinking:) I'd take that....but actually I think it can go higher given time as the business expands, becomes fully reporting, uplists etc..... imo:)
GLTA
PPS Estimate: From CEO Interview
CEO stated 8 cents earnings per share pre-tax which equates to c. 5 cents earnings per share net which with a conservative PE of say just 4 equals.........
20 cents/ share....just based on these first loan deals........;)
GLTA
fringe...
Some background on HCPC.......upside potential based on fundamentals is huge imo
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23015307
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23057408
http://investorshub.advfn.com/boards/read_msg.asp?message_id=23061310
Good luck:)
Neil
GLTA
Braden,
Yep, in the interview Ms, Johnson mentioned the software and that it allowed the institutional investors real-time access to monitor the underlying loans, be they individual loans or in a pool, to check how they are performing. That provides comfort to the investors/ funding source in a way that current packaging of commercial loans in the traditional way does not allow.....so big plus here....especially when credit issues have made funding loans so difficult of late.......HCPC seems to have a definite edge....right product, right time imo
14th on most read board list...nearly 7000 reads........