Loan Stock
Common or preferred stock shares that are used as collateral to secure a loan from another party. The loan will earn a fixed interest rate, much like a standard loan, and can be secured or unsecured. A secured loan stock may also be called a convertible loan stock if the loan stock can be directly converted to common shares under specified conditions and with a pre-determined conversion rate, as with an irredeemable convertible unsecured loan stock(ICULS).
This type of financing is also known as "portfolio loan stock financing". Investopedia Says:
There are actually full-fledged businesses that do nothing but loan-stock transactions, allowing a portfolio holder to obtain financing based on the value of their securities, as well as other factors such as the implied volatility of their holdings. A loan-to-value (of the portfolio) ratio will be established - much like with a home mortgage - and the funds will be backed by the security holdings in the borrower's portfolio. Related Terms:
Accelerated Payments
Collateral
Convertible Bond
Fixed Interest Rate
Irredeemable Convertible Unsecured Loan Stock - ICULS
Loan
Unsecured Loan |