Equity Lending Facility (ELF)

The ELF is intended to provide a financing solution to ESIOA and ESIOB option holders who wish to convert their options to fully paid ordinary shares (ASX:ESI) ahead of expiry on 31 July 2017 .

For more information, scroll  down to our Frequently Asked Questions.

Frequently Asked Questions

What is the ELF?

The ELF is intended to provide a financing solution to those options holders unable to secure their own financing should they wish to convert their options to fully paid ordinary shares (ASX:ESI) ahead of expiry on 31 July 2017.

What are the terms of the ELF?

The current intended terms of the ELF are consistent with prior announcements, with some variation:

• Eligibility: The Company will offer all ESIOA and ESIOB option holders a loan to convert their options into fully paid ordinary shares.
• Restrictions: Lending approvals are not restricted by lending or leverage ratios, although a minimum loan size of $1,000 will apply. Only one loan per registered name for ESIOA and ESIOB will be offered.
• Loan Term: The term of the loan will be fixed for three years.
• Interest Rates:Initial interest rates are tiered, per the following table

• The above table is intended to act as a guide and the final interest rates are subject to change.
  • A benchmark interest rate (11.64%) will be charged across the loan period and will be discounted by two factors:
    • Loan to Strike Ratio (LSR) – The loan to strike ratio refers to the value of the loan as a percentage of the total cost to exercise the options (0.9 cents x the number of ESIOA units for ESIOA options; and 1.5 cents x the number of ESIOB units for ESIOB options). In this way, the more cash contributed in taking the loan up, the lower the LSR, and the lower the interest rate
    • Interest Payment Method (IPM) – For example, pre-paid interest will receive a lower interest rate, whereas you will attract a higher interest rate if you elect to capitalise your interest payments.
  • The benchmark interest rate is referenced to CBA’s 6 month fixed margin lending rate plus 500 basis points (bps).  This reference rate will continue over the life of the ELF loans. See http://www.ratecity.com.au/margin-loans/commsec/margin-loan-6mth-fixed?q%5Bamount%5D=30000&source=ratecity
• No margin calls: The borrower will have no exposure to margin calls but the secured shares* will be held under a locked account with the Share Registry for the term of the loan.
• Limited recourse: The loan recourse will be limited to the shares held as security.
• No Trading: The secured shares cannot be traded until each loan is fully satisfied and the trading lock is removed.
• Repayment: At expiry of the facility, the loan balance will need to be paid out in cash, otherwise the loan will be due and payable and the Company will seek a buy-back of the stock at the prevailing share price (requiring approval of shareholders at the next general meeting), inclusive of additional interest, facility fees, and buy-back costs.
• Early repayment: No penalties will be charged for early repayment before the expiry of the three year loan term.
• Partial pre-payment: Borrowers can make partial pre-payments at the scheduled 6 monthly intervals. Such payments may attract interest rate discounts, where the borrowers LSR falls into a lower category, but all secured shares will remain locked until the loan is repaid in full. There are no opportunities for partial release of securities throughout the loan term without repayment of the loan balance in full.

How many loans can I apply for?

Each entity may apply for one (1) loan for each holding of ESIOA and ESIOB units you hold under that entity.

An entity will either be a person (individual or joint account), a company, a company acting as a trustee, an individual acting as a trustee or a self-managed super fund (SMSF).

A person may have more than one entity. For example, John Smith may have options in their own name and under a SMSF for which they are a trustee. In this case, John can apply for two separate loans.

How does the ELF effect my eligibility for the recently announced ESIOC Bonus Options?

In relation to ESIOC Bonus Issue eligibility (ASX announcement 19 June 2017), only shareholdings at the record date (21 July 2017) will be entitled to receive the Bonus Options. Under the ELF, ESIOA and ESIOB options will not convert to shares until 31 July 2017, which is after the record date (21 July 2017) for entitlement under the Bonus Issue. Therefore, if an option holder takes up the ELF facility in order to convert options to shares, those shares will not be eligible for the Bonus Issue.

Can a Self-manager Super fund apply?

• The ELF has been structured to support self-managed super fund (SMSF) applicants, although each SMSF will be required to provide their own custodian (bare trust) to hold the shares as security for the loan. We recommend SMSF trustees seek financial advice to determine whether this offering is suitable for them.
• Setting up a custodian is a routine process when borrowing to purchase a complying asset (e.g. investment property, shares) under a SMSF. As such, most financial advisors should be able to deliver this service quickly and cost effectively.

Can you explain how the tiered interest payment method and loan-strike ratio works?

Scenario A

• You have 1,000,000 ESIOA Options.
• The total exercise price is $9,000.
• You want to pay interest 12 months in advance.
• You want to reduce the interest payment to 6.64%.
• To achieve this, you pay $1,440 to bring the loan value down to $7,560. This brings the LSR down to 84%.
• You also prepay 12 months interest on $7,560, being $501.98.
• Total upfront payment: $1,941.98
• You’ll make two more interest payments of $501.98 each, at 12 month intervals.
• You’ll make a final loan payment of $7,560 at the end of the 3-year term, after which the shares will be released.

Scenario B

• You have 1,000,000 ESIOA Options.
• The total exercise price is $9,000.
• You want to pay interest every 6 months in arrears.
• You want to reduce the interest payment to 4.14%.
• To achieve this, you pay $4,140 to bring the loan value down to $4,860. This brings the LSR down to 54%.
• Total upfront payment: $4,140.
• You pay 6 months interest (4.14% p.a. / 2) on $4,860, being $100.60.
• You’ll make five more interest payments of $100.60 each, at 6 month intervals.
• You’ll make a final loan payment of $4,860 at the end of the 3-year term, after which the shares will be released.

Scenario C

• You have 1,000,000 ESIOA Options.
• The total exercise price is $9,000.
• You want to capitalise the interest.
• You do not wish to make a deposit.
• The LSR is 100% on commencement of the loan.
• Total upfront payment: $0.
• Interest is capitalised (rolled into the loan amount) every 6 months incurring interest at 11.64% p.a. as follows:

• You’ll make no interest payments during the loan term.
• You’ll make a final loan payment of $12,633.57 at the end of the 3-year term, after which the shares will be released.

*The ‘secured shares’ are those shares created through the exercise of options which are funded under the ELF program.

How do I obtain the paper work?

When an applicant completes the online application, they will be prompted to either a) Download or b) Print the contract. Applicants need to make sure they choose either of these options as there is no function to return to a previous application once you have closed the application window. If you have made an error in your application or wish to change some of the selections, simply re-access the application platform and start the application process again.

Do I need to submit a separate application for ESIOA and ESIOB holdings?

The shares resulting from the exercise of each option series will be held under separate loan agreements. Therefore, if an applicant holds both ESIOA and ESIOB series that they wish to finance through the ELF, then that applicant will need to apply for two separate loans.

Do I pay the $200 application fee for each loan?

Yes, the $200 application fee is payable for each loan, unless the loan meets the criteria for waiving this fee, being either pre-paid interest or an LSR <85%.

There is also an additional $200 fee for all SMSF applications. This fee covers the legal review of the SMSF custodian / bare trust deed.

How is the 2% management fee applied?

There is a management fee of 2% per annum which will only be charged at the end of each 6-month period where a loan has an LSR >85% and the interest is capitalised.

This fee is added to the loan and is not required to be paid in cash.

This fee will be waived in all other circumstances.

What is the latest I can submit my application?

Applications must be received, at least via email, by the deadline of 7pm on Wednesday 26th of July.

An electronic copy of the signed contract and certified identification documents can be sent to info@ectfinance.com.au.

The signed paper copy of the contract and certified identification documents must be sent to PO Box 482, South Yarra VIC 3141.

[Edit – application were extended to, and closed at, 5pm (Melbourne time) on Monday 31 July 2017.]

What is the last day that I can buy ESIOA and ESIOB Options on the ASX?

ESIOA and ESIOB Option can be purchase on market up to the last day of trading, Monday 24th of July 2017.

All ESIOB and ESIOA options will be eligible to participate in the ELF and holders will be able to include recently purchased ESIOA and ESIOB options, subject to the ELF Application deadline noted above.

Is there a limit to the number of Options I can finance under the ELF?

There is no restriction on the maximum number of units a holder can apply to finance via the ELF.

The minimum loan size is $1,000.

I’ve purchased more Options, but the balance in the ELF application has not updated. Why?

The application platform is updated periodically. If the balance on the application screen is less than your expected holding, you may hand write the number of Options you wish to apply for on the application form.

Data updates will again be run on the 25th and 26th of July, to account for the last day of trading of Options, being the 24th of July.

What if I need more time to submit my application?

An extension to the close date will be considered and updated to the market by Tuesday 25th of July.

What if I hold Options under more than one HIN. Can they be combined into one loan?

These will be separate loans.

If I pay down my loan to a lower LSR in the future, will my interest rate be re-calculated?

Borrowers will have the opportunity to adjust the basis for their loan interest payment method every 6 months. A lower Loan-to-Strike Ratio (LSR) will attract a lower interest rate.

I have printed my loan document, where do I sign?

Instructions on how to complete the Application are provided on page 3 of the Application.

Applicants must ensure they sign page 21.

Where applicable, Option Transferees must fill in schedule 1.

All Applicants must fill in Schedule 3 per the instructions on pages 2 & 3.