Equity Lending Facility

Frequently Asked Questions

ECTOE Options ELF Applications are now closed

Applications for an Equity Lending Facility for ECTOE Options closed at 5 pm on Friday 10 February, 2023.

These FAQs provide further clarification around several terms, conditions and features of the ELF.

To view the answers, simply click or tap on the questions below to expand the content.

1. What is the ELF?

The ELF offers a financing solution to holders (Option Holders) of ECTOE options (Options) provided by ECT Finance Limited (ECTF) should they wish to exercise their Options into fully paid ordinary shares in Environmental Clean Technologies Limited (ASX: ECT) (ECT) (ECT Shares). An ELF loan effectively extends the life of the Options by a further three years.

2. What is an Expression of Interest (EOI)?

An expression of interest, or EOI, is a non-binding notification that an option holder is considering entering an ELF loan arrangement with ECTF.

3. When do EOI and ELF applications open?

The EOI process will open to eligible option ECTOE holders on 22 December 2022.

Formal ELF applications open on 18 January 2023 for Option Holders with at least 333,334 Options when the ELF application is submitted.

4. What dos the ELF loan application entail?

The ELF loan application process will be online via ECT’s share registry, Automic. A link will be provided in a subsequent ASX announcement.

In order to make an ELF loan application, applicants will need the following:

  • A valid e-mail address and mobile phone number
  • Their Holder Identification Number (HIN) or Shareholder Reference Number (SRN)
  • Digital copies (e.g. scan or digital photo) of the relevant identification documents listed in the Document Checklist section below to comply with ‘Know Your Customer’ (KYC) requirements
  • See the Document Checklist section below for additional requirements in relation to applicants that are either a company or SMSF

Following submission, applicants will receive an email from DocuSign TM with copies of the ELF deed for electronic execution.

Any cash co-contributions will be made via Automic’s payment portal.

Please contact Automic if you are unsure of your HIN/SRN: [email protected] / 1300 288 664.

 

5. How many Options do I need to own to qualify for an ELF loan?

Options Holders must hold at least 333,334 Options to apply for an ELF loan. Anyone can purchase more Options to qualify, provided the purchase is completed and the ELF loan application is lodged by 13 February 2023.

6. What is the latest date I can submit my ELF loan application?

Applications and supporting documentation must be received by 10 February 2023.

7. What if I need more time to submit my application?

No extensions are available beyond the ELF loan application closing date of 13 February 2023.

8. How do I apply for an ELF?

Applicants must apply online via our share registry (Automic) (to be finalised). A link to the application page will be provided via an ASX announcement and posted on the ECTF website when the page becomes active.

9. What happens if I want to change the details on my ELF application?

If you have made an error in your application or wish to change some details, please get in touch with ECTF via email ([email protected]) or +613 9849 6203 immediately to cancel your incorrect application and then start a new one.

10. If I have printed my loan document, where do I sign it?

ECTF will not accept printed ELF applications. ELF loan applicants must apply online via the Automic website and are required to sign the ELF deed electronically using DocuSignTM.

11. How do I sign the ELF deed via DocuSign?

You will be required to provide the mobile phone number and email address of yourself and your designated witness (if entering into the ELF deed as an individual), two directors (if applicable) /company secretary that will be signing the ELF deed on behalf of the company (if entering into the ELF deed as a company) or each trustee (if entering into the ELF deed as a SMSF). The Option Transferee (if applicable) will also be required to provide the above details depending on the capacity that they will be entering into the ELF deed.

Each signatory will receive an email with a link to sign the ELF deed, which will then require authentication via a text message to the signatory’s mobile phone. A DocuSignTM.

12. Do I need to submit a separate ELF loan application for each ECTOE holding?

Yes.

13. What types of entities can apply for an ELF loan?

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, an Option Holder may have Options in their name and in an SMSF for which they are a trustee. In this case, the individual and the SMSF can apply for separate ELF loans.

14. What do I need to do if I have an SMSF?

The ELF has been structured to support SMSF applicants, although each SMSF will be required to hold the shares via a custodian (or trustee of a bare trust) as security for the loan. A fee that covers the legal review of the SMSF custodian/bare trust deed (SMSF Custodian Fee) must be paid to ECT Finance before entering into the ELF. It is recommended that trustees seek independent financial and legal advice to determine whether or not this offer is suitable for them.

15. What identification documents will I need to provide?

Applicants (both Option Holder and Option Transferee (if applicable)) will be required to provide one document from column A and at least one document from column B (see table below), plus a change of name or marriage certificate (if necessary).

Column A       Column B
Passport Birth Certificate, Citizen Certificate or Descent Certificate
Driver’s Licence Credit/Debit Card
Government Issued Proof of Age Card (with photo)
Medicare Card

The documents must be certified by an authorised witness and uploaded in a digital format (PDF, JPG, PNG) during the application process.

An authorised witness can include a principal of a registered school, lawyer, medical practitioner, dentist, pharmacist, veterinarian, accountant, minister of religion authorised to celebrate marriages, a justice of the peace or a bail justice, bank manager and police officer.

Document checklist – Companies

If the applicant is a company, each Officer executing the Loan and Security Deed must provide the above identification documents. An Officer means either (i) sole director and secretary; or (ii) at least two directors, as applicable.

Document checklist – SMSFs

If you are an SMSF, you must also provide:

  • the identification documentation for each Officer of a corporate custodian that has been appointed by the SMSF; and
  • a scanned copy of your custodian deed or bare trust deed.
16. 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 an Option Holder can include in their ELF loan. The minimum loan amount is $10,000.02, or 333,334 Options. Current Option Holders or shareholders may choose to purchase Options on-market to reach the minimum threshold.

Once ELF applications have been submitted, Option Holders are not permitted to transfer, exercise, sell or otherwise deal with any Options that are the subject of an ELF application in the intervening period between making an ELF application and loan settlement.

17. What if the loan amount is less than the amount required to exercise all Options I hold?

If you request a loan amount that is less than the amount required to exercise all Options that you hold (Exercise Amount), you will be required to pay the sum of the Exercise Amount minus the loan amount (Borrower Contribution). The Borrower Contribution must be paid to ECTF at the commencement of the ELF loan.

18. What is the term of an ELF loan?

The ELF loan will have a term of 36 months from the date the Option Holder and ECTF sign the ELF deed.

19. What are the interest payment terms for an ELF loan?

You can either choose to prepay interest 12 months in advance or have the interest capitalised every 6 months. The interest payment method you choose, along with the Exercise Amount and the Borrower Contribution, will determine the loan strike ratio (LSR), which will subsequently determine the interest rate for the ELF loan (the benchmark rate minus percentage points).

20. Can you explain how the interest payment method and LSR affect the interest rate?

Scenario A

  • You hold 1,000,000 Options
  • The total ELF loan is $30,000, assuming no up-front capital payment is made
  • You have the choice between paying 12 months’ interest in advance or having the interest capitalised to your loan every 6 months in arrears
  • To reduce the interest rate, you provide a Borrower Contribution of $6,001 at loan commencement to bring the loan value down to $23,999. This brings the LSR down to 79.99% and reduces the interest rate
  • You also decide to prepay 12 months of interest in advance on $23,999, which will also reduce the interest rate
  • You make two more payments of interest in advance at 12-month intervals
  • You make a final loan payment of $23,999 at the end of the 3-year term, after which the ECT shares will be released

Scenario B

  • You hold 1,000,000 Options
  • The total ELF loan is $30,000, assuming no up-front principal payment is made
  • You have the choice between paying 12 months’ interest in advance or having the interest capitalised to your loan every 6 months in arrears
  • You choose to capitalise the interest on the loan every 6 months in arrears
  • You do not wish to provide a Borrower Contribution.
  • The LSR is 100%
  • The total upfront payment will be a loan application fee only (plus SMSF fee as applicable)
  • You make no interest payments during the loan term
  • You make a final loan payment relating to the principal plus three years of accrued interest (capitalised every 6 months for the term of the loan) at the end of the 3-year term, after which the ECT shares will be released.

 

 

 

21. Will the interest rate change?

Once the final LSR has been determined, applicable interest rates will not change.

22. What fees are payable for each loan?

An establishment fee of $200 is payable for each loan unless the loan meets the criteria for waiving this fee; either choosing the pre-paid interest payment method or the LSR being less than 80%. There is also an additional SMSF Custodian Fee of $250 for all SMSF applications.

23. I have purchased more Options, but the balance in the ELF application has not been updated. Why?

Suppose Option Holders purchase additional Options on-market after making an ELF application. In that case, the ELF application will continue to relate only to the initial number of options stated in the ELF application, and any newly acquired Options will not be part of the ELF loan. In these cases, the initial application will need to be cancelled by contacting ECTF and lodging a new ELF application prior to the closing date.

 

24. I hold ECT Shares in addition to those under the ELF. What will happen to those shares?

When ECTF provides an ELF loan to enable borrowers to exercise their Options, the ECT shares issued as a result of the exercised Options will be locked and held as security by ECTF for the loan.

ECT Shares not subject to an ELF loan will remain unaffected.

25. If I repay the loan amount to a lower LSR in the future, will my interest rate be re-calculated?

Other than at loan commencement, borrowers can alter their loan interest payment method every 6 months by paying interest in advance or making a principal payment off the loan, which will reduce the LSR.

26. Is my ELF loan limited recourse?

Yes. This means that the only security ECTF takes for the loan is the ECT Shares that are issued when the Options are exercised. ECTF will register a security interest on the Personal Properties Securities Register over the ECT Shares and their proceeds as security.

You cannot be held personally liable for the repayment of the ELF loan.

27. Can ECTF sell my shares on the market if I don’t repay my ELF loan?

Sell down of your ECT Shares is available in accordance with the terms of the ELF.

Under the terms and conditions of the ELF deed, ECTF has the right to take control of ECT shares that are issued upon exercising the Options that are subject to the ELF loan if any amount owing under the ELF deed has not been repaid when due.

28. Can I claim interest on my ELF loan even though it will not be repaid?

ECTF cannot provide taxation advice. We recommend you speak to your financial advisor or accountant on the treatment of interest relating to your ELF loan.

29. What are some of the key terms of the ELF?

The current intended terms of the February 2023 ELF are as follows:

Eligibility: ECTF will offer all Option Holders and Option Transferees (where applicable) an ELF loan to convert their options into fully paid ordinary shares.

Restrictions: A minimum loan size of $10,000.02 (or 333,334 units) will apply. ELF loan applicants can purchase Options on the market to reach this threshold up until applications close.

Loan term: The term of the loan is 36 months. Borrowers can repay the loan principal at any time.

Strike price: The strike price for each Option is $0.03.

Interest rates:

Initial interest rates are tiered, per the following Interest Payment Matrix (IPM)

Interest Payment Method
Loan-service ratio (%) 12 Months in Advance Capitalised 6-monthly (simple)
100-80

9%.

Benchmark Rate minus prepaid discount of 4%

Benchmark Rate

(13%)

<80

2%.

Benchmark Rate minus prepaid & co-payment discount of 11%

6%.

Benchmark Rate minus co-payment discount of 7%

The above table is intended to act as a guide only and may be subject to change.

A benchmark interest rate will be charged across the loan period and will be discounted by two factors:

  • LSR – The LSR refers to the loan’s value as a percentage of the overall costs of exercising the options (strike price of each Option x the number of Options to be exercised). If the ELF borrower reduces their LSR to <80% by making a repayment of the loan principal amount, this will reduce the LSR and the interest rate.
  • Interest Payment Method (IPM) – pre-paid interest will reward the ELF borrower with a reduction in the interest rate, whereas ELF borrowers that capitalised interest payments 6-monthly will receive no discount.

The benchmark interest is the reference rate that will continue over the life of the ELF loan.

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 until the loan is paid.

Secured shares: These are those ECT shares issued through the exercise of the Options, funded by an ELF.

Limited recourse: The loan recourse will be limited to the secured shares and their proceeds as security.

No trading: The secured shares cannot be traded until the ELF loan is fully repaid and the holding lock is removed.

Repayment: Before the expiry of the term of the ELF loan, the ELF loan will need to be repaid otherwise the secured shares will be forfeited.

Early repayment: No penalties will be charged for full loan repayment before the expiry of the three-year term.

Partial prepayment: Borrowers can make partial pre-payments within 10 business days following scheduled 6-monthly intervals. Such payments may result in interest rate discounts for the remainder of the loan where the borrower’s LSR falls below 80%. All secured shares will remain locked until the loan is repaid in full. At the conclusion of the loan period, a pro rata release of shares will be made if principal payments have been made. The number of shares released will be calculated by dividing the total amount of principal payments by the loan balance at the end of the loan period.

Should you require further information regarding the February 2023 ELF, please contact ECTF: [email protected].

Share registry (Automic): [email protected] / 1300 288 664

Question not answered here?

You can email us: [email protected]