Bank Cash Deposit Program
American Medical Capital, LLC, (AMC) is offering a unique mechanism for significantly and quickly increasing bank deposits. This is a confidential program and can be transparent in financial disclosure. Other than reporting increased deposits, the transaction is not made public. This program is also available as a Certificate of Deposit (Commercial CD) and is similarly structured.
AMC allows banks to originate the cash deposit by simply issuing a Direct-Pay Letter of Credit on behalf of the bank to a trustee bank, which can be an off-balance sheet, in the footnotes item. The cash deposit is then used as compliant collateral and AMC is prohibited any access to the funds by the bank. The bank can return the funds or a portion of the funds at any time. The bank takes the lead role in how they desire to internally structure the deal. The funds are provided at a cost of floating, interest-only, 30-day Libor. The deal is structured so that the bank does not pay any upfront fees.
As stated above, the bank will be required to pay a monthly fee, plus a small annual renewal fee in the second and subsequent years. We arrange to provide banks with cash deposits from $25mm on up—depending on the size and health of the bank. Generally, we consider working with banks that have at least $3 billion in assets.
Typically, the deal is structured to renew annually (up to 7 years). The funds will remain on deposit in the bank as long as the Direct-Pay Letter of Credit remains outstanding. The bank may decide to reduce or increase the DPLC — and corresponding funds on deposit — in future years.
Going into the program, the bank may also decide to initiate and phase out the program over time. For example, a bank may decide to receive a cash deposit of $500mm and phase out the program beginning in the 3rd year lowering it to $300mm, then $200mm in the 4th year and zero by the end of the 7th year. Any closing fees that were deducted from the loans proceeds are never paid back by the bank, to AMC.
After preliminary discussions with AMC, the bank determines the amount of the deposit desired. AMC will approve the amount based upon the size and health of the bank, and issues a letter to the bank stating that AMC will be arranging a deposit in the amount of $X into the bank.
- The bank then issues a Letter of Intent to AMC to provide a Direct Pay Letter of Credit as collateral for the funds.
- AMC then begins the two to four-week process of arranging the syndication of the deposit and the bank begins the process of issuing the DPLC. The DPLC is structured such that a trustee bank serves as the beneficiary bank. The trustee bank will not be the lender but we pay them an underwriting fee. Also, the DPLC is essential to ensure that 100% of the value of the DPLC will be paid to AMC in the event of a default. However, the trustee bank will not draw on the DPLC unless:
A. The interest only (30-day Libor) payment is 60 days in default.
B. The annual renewal fee is not paid.
C. The DPLC is no longer renewed by the bank at which time the
funds will be returned.
Once the syndication is complete, AMC will arrange for the deposit of the full amount of the DPLC, less any one-time fees into an AMC, DDA at the bank. The bank will then freeze the funds until the deal terminates.