Can anyone explain what they will actually earn off the guarantee?
They have shied away from outlining what the spread or premium is to funding provided by the commercial banks.
I am thinking they would be charging a 200 basis point spread over the bank funding. See below for my thoughts....
They are providing a guarantee of $75m.
Bank debt is $250m.
If they are charging 200 basis points that would be $5.0m in guarantee fees.
Add on the management fee of 1.05% (all it 1%) which equates to $2.5m.
So total of $7.5m divided by the guarantee of $75m equates to a 10% return as outlined in the return rate estimate of the guarantee key terms on page 10 of the explanatory memorandum.
Am I on the right track?
Guarantee Fee
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