Tailored Equity Collar

Features

Macquarie's Tailored Equity Collar (TEC) provide investors with a flexible, tailored platform to gain exposure to ASX listed shares with protection⁺ at expiry. Your clients can choose to borrow up to 100 per cent of the purchase price of an ASX listed share with 95 per cent protection⁺ at expiry^, with no risk of margin calls.

TECs may also provide a funding and risk management solution for your executive clients with large single shareholdings or employee option positions.

Key benefits

• Access a wide range of ASX listed shares, with the comfort of protection⁺ at expiry
• Potentially borrow up to 100 per cent^ with no margin calls
• Receive any ordinary cash dividends and franking credits* throughout the investment
• Flexible investment timeframes and the freedom to tailor structures
• Reduce the upfront cost of protection⁺ by creating a "collar" structure where participation in upside growth is capped
• Interest Assistance Loans ("IALs") are a cashflow management tool potentially available in conjunction with a Tailored Equity Collar.

Risks

Some of the risks of investing through a Tailored Equity Collar Facility include:

• the value of the ASX listed shares may fall substantially, even over a short period of time. The more volatile the price of the shares is, the riskier your client's investment will be
• if your client sets a cap price for their option(s), they will need to pay to us any gains in the value of the shares above the cap price on the expiry of the option(s)
• your client will have to pay all amounts owing in relation to their investment, even if the investment performs poorly
• in certain circumstances, which include events nominated by us and events beyond your client's control, your client's options and loans may be terminated or lapsed early. In some circumstances, your client may be required to make further payments to us
• the more highly geared your client's investment is, the riskier the investment will be
• us exercising a discretion we have under the terms of the TEC in a way which adversely affects your client (although we will exercise any discretions in a reasonable manner) and
• if we fail to perform our obligations, your client's may not receive any payment which they are entitled to receive from us.

You and your client should carefully consider the risks that may affect the value of your client's investment before making any investment decision. You and your client should refer to the PDS for more detailed information about the risks of investing through a Tailored Equity Collar Facility.

Terms and conditions

Please click here for the Terms and Conditions for Tailored Equity Collars

How do they work? 

This information is only a summary of some of the main features of a TEC. You should refer to the PDS for full details of how a TEC works.

TECs enable investors to invest in ASX listed shares, protect the value of their investment at expiry and access an optional linked loan facility.

A TEC enables your client to set a protection⁺ level that applies to their shares on expiry (protection price⁺). To reduce the upfront cost of this protection⁺, your client can also limit their participation in any upside growth in the shares by setting an upside cap (cap price) (as shown below).

TEC investment cycle

Upfront	During the investment	On expiry
Your client can choose a preferred protection+ level (up to a maximum of 100%) Your client can borrow up to 100%^ of the investment amount Your client contributes the difference between the investment amount and the loan amount (if any) plus any interest and protection+ costs Your client has the option to reduce the upfront cost of protection+ by creating a "collar" structure where upside growth is capped Potential to prepay interest (for up to 12 months) with an Interest Assistance Loan.	Receive any ordinary cash dividends and franking credits* No margin calls Pay any additional interest and protection+ costs, where the term of option(s) and/or the loan are greater than 12 months. In some circumstances: the terms of the option(s) may also be adjusted (eg where corporate actions occur) and the options and any loans may be terminated early in which case further payments may be required from your client to us.	When your client's TEC expires, your client can choose to: Extend their investment for a further term#^ Retain the shares by paying any amounts owed to us (eg any loan and variable premium, that is the amount by which the value of the shares on expiry exceed the cap price) Sell their shares and receive the sale proceeds (if any) less any amounts owed to us (eg any loan and variable premium). If there is any shortfall, your client will need to pay the balance to us from their own funds.

 

More information

At a glance

Shares available	Wide range of ASX listed shares available (subject to Macquarie's approval)
Gearing level	Optional and flexible. Investors can potentially borrow up to 100% of the purchase price with 95% protection+^, or contribute all of their own capital
Protection level+	Investors have the flexibility to set preferred protection levels (up to a maximum of 100%)
Investment term	Flexible investment terms of six months to five years available
Minimum investment amount	$100,000 per share
Distributions	Receive all ordinary cash dividends and franking credits*# from the shares over the life of the investment
Prepay interest	Potential to prepay interest up to 12 months in advance
IAL	Investors have the potential to access an IAL, to assist with interest payment obligations and minimise their up front cash outlay by funding the prepayment of interest prior to the end of each financial year^

 

Who might consider TECs?

• Advisers who are familiar with protected equity lending, but would like to tailor a geared strategy for clients
• Investors wishing to gain exposure to an ASX listed share, with the added comfort of protection⁺ at expiry
• Investors with a shorter-term view on the market, or reluctance to commence long-term gearing commitments
• Investors who may wish to contribute some of their own capital in order to lower their loan to value ratio (LVR), and in doing so, reduce the overall cost of protection⁺
• Executives with large single shareholdings or employee option positions who are looking for a funding and risk management solution.

 

How to invest

Step 1	Download a copy of the Product Disclosure Statement (PDS) and Terms and Conditions and provide this to your client
Step 2	Ensure your client reads the PDS and the Terms and Conditions carefully
Step 3	Arrange for your client to complete the application form within the PDS, obtain any other relevant documentation that may be required (eg AML information), and submit directly to Macquarie: Client Service Team - Tailored Collar Solutions Macquarie Bank Limited GPO Box 4294 SYDNEY NSW 1164 or Fax to: (02) 8232 6158 Note: application forms may be faxed to us on the number above and we may act on that fax. You should however send your client's original application form to us for our records
Step 4	Contact Macquarie to discuss your client's proposed TEC investment on 1800 080 033. Your client should then complete a transaction request detailing your client's proposed investment and submit it, together with any other required information (eg credit information) directly to Macquarie: Client Service Team - Tailored Collar Solutions Macquarie Bank Limited GPO Box 4294 SYDNEY NSW 1164 or Fax to: (02) 8232 6158 Note: Transaction Requests may be faxed to us on the number referred to above. While we may act on a facsimile Transaction Request, you should however send your client's original Transaction Request to us for our records.