08 State Export finance funds brown

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  • Mike- Bullet spacing & type over on Problems Color and type over on Consequences.
  • Through the 21 st Century Jobs Fund, the MEDC has made over $20 million in designated pre-seed funds available to groups such as those listed here. Michigan’s award winning SmartZones are collaborations between universities, industry, research organizations, government, and other community institutions intended to stimulate the growth of technology-based businesses and jobs. They provide services such as business support services, consulting, incubator space, talent portals, and networking opportunities. MUCI (Michigan Universities Commercialization Initiative) is a collaboration of 10 universities in Michigan designed to complement and enhance the technology transfer at Michigan academic and research institutions by supporting commercialization of Intellectual Property
  • As we discussed earlier, there is a great base for innovation and company formation in Michigan in terms of research and development expenditures and patent generation. But the market has failed to act quickly enough to commercialize this research. The Commercialization Competition was designed to place resources directly in the hands of the most promising and innovative young companies, researchers, and entrepreneurs in Michigan. To date it has awarded $126.3 million to 78 highly recommended projects through a competitive proposal process. The CC helps fund projects in four categories: basic research, applied research, commercialization activities, and support services - in one of four competitive edge technology sectors: life sciences; alternative energy; advanced automotive, manufacturing and materials; or homeland security and defense. The process was peer reviewed by AAAS, an international non-profit organization dedicated to advancing science around the world that developed review panels of experts in each of the 4 targeted sectors as well as professional investors. The awards were made in the form of grants to non-profits (generally university research projects) and loans to for-profits. Flexibility is important as not all companies have the same needs and funding requirements.
  • These two programs are investment funds set up in a fund of fund structure and will invest more than $200 million into VC, private equity, and mezzanine funds that target investments in Michigan. Conservatively, it is estimated that the funds invested in by our FoF will raise an additional $600 million of outside capital, however it is likely that this number will be much higher- more than $1 billion. The 21 st CJF requires that funds it makes investments in open and staff an office in MI, while the VMF only requires a significant presence. The two were designed to work together to create a continuum of access to capital – the VMF focuses on seed and early stage investors while the 21 st CJF can invest in later stage, buy-out, and mezzanine funds. Adding to this synergy, while the funds have separate investment committees and governance structures, they are both managed by Credit Suisse’s Customized Fund investment Group.
  • Visteon Corp. would have to seek Chapter 11 bankruptcy protection soon because of a liquidity crisis brought on by a reduction of revenue that began in the fourth quarter. Visteon made a bond payment in full last week ahead of a deadline, avoiding a default that had threatened to send the company into bankruptcy. http://www.autonews.com/article/20090316/COPY/303169980 Example 1… United Metal Products –Detroit is a leading high volume stamping & assembly company for a wide range of auto. Purchasing an exiting defense focused stamping company in Florida and moving the work to Michigan. MEDC is reviewing a $2.4MM participation as part of a total $6.0MM loan package for this acquisition. It is anticipated to create a significant number of jobs and will help to stabilize the firm’s revenues. The bank could not justify the entire facility in light of the declining value of automotive receivables which comprise the current majority of the firms work. Example 2… Mark One Corporation builds large materials handling machines for the automotive industry. Typically these machines handle and manufacture parts you can see, body panels, etc.. Mark One was challenged to find a less caustic and more environmentally sound way to clean steel in preparation for stamping and welding. Steel comes with oil and industrial lubricants on it to prevent rust in transit. Typically corrosive chemicals were applied to clean it but this has proven expensive and environmentally unsound. Mark One developed a non-caustic system of rolling the steel clean saving millions of dollars for their clients and venturing into a new, diversified field. Mark One wants to expand its Clean Steel operation but is having difficulty securing financing because its core business is still heavily linked to automotive. Terms are currently under discussion. Working on a third… Wright-K technologies, a 100% automotive supplier has recently secured patents and IP and has formed a new division using cash on hand to attempt to begin supplying the electrified auto drive train and to produce components for the wind energy sector. They have a close relationship with our local economic development partner, Saginaw Future who introduced them to their current bank-1st State Bank. The company has a good relationship with the bank but was struggling to get away from operating on an all cash basis as they begin to commercialize the IP and start selling products and services. They currently have the first $1.0MM request in front of 1st State Bank, who is struggling with the automotive receivables which the parent firm must continue to manage. Participation in this program with 1st State Bank is an ideal solution for both participants. The proposal is currently under review.
  • Visteon Corp. would have to seek Chapter 11 bankruptcy protection soon because of a liquidity crisis brought on by a reduction of revenue that began in the fourth quarter. Visteon made a bond payment in full last week ahead of a deadline, avoiding a default that had threatened to send the company into bankruptcy. http://www.autonews.com/article/20090316/COPY/303169980 Example 1… United Metal Products –Detroit is a leading high volume stamping & assembly company for a wide range of auto. Purchasing an exiting defense focused stamping company in Florida and moving the work to Michigan. MEDC is reviewing a $2.4MM participation as part of a total $6.0MM loan package for this acquisition. It is anticipated to create a significant number of jobs and will help to stabilize the firm’s revenues. The bank could not justify the entire facility in light of the declining value of automotive receivables which comprise the current majority of the firms work. Example 2… Mark One Corporation builds large materials handling machines for the automotive industry. Typically these machines handle and manufacture parts you can see, body panels, etc.. Mark One was challenged to find a less caustic and more environmentally sound way to clean steel in preparation for stamping and welding. Steel comes with oil and industrial lubricants on it to prevent rust in transit. Typically corrosive chemicals were applied to clean it but this has proven expensive and environmentally unsound. Mark One developed a non-caustic system of rolling the steel clean saving millions of dollars for their clients and venturing into a new, diversified field. Mark One wants to expand its Clean Steel operation but is having difficulty securing financing because its core business is still heavily linked to automotive. Terms are currently under discussion. Working on a third… Wright-K technologies, a 100% automotive supplier has recently secured patents and IP and has formed a new division using cash on hand to attempt to begin supplying the electrified auto drive train and to produce components for the wind energy sector. They have a close relationship with our local economic development partner, Saginaw Future who introduced them to their current bank-1st State Bank. The company has a good relationship with the bank but was struggling to get away from operating on an all cash basis as they begin to commercialize the IP and start selling products and services. They currently have the first $1.0MM request in front of 1st State Bank, who is struggling with the automotive receivables which the parent firm must continue to manage. Participation in this program with 1st State Bank is an ideal solution for both participants. The proposal is currently under review.
  • 08 State Export finance funds brown

    1. 1. MEDC Capital Services Team Help with financing your exports
    2. 2. Contents <ul><ul><li>Capital Continuum </li></ul></ul><ul><ul><li>Collateral Support Program </li></ul></ul><ul><ul><li>Loan Participation Program </li></ul></ul><ul><ul><li>Export Program </li></ul></ul><ul><ul><li>Contact Information </li></ul></ul>
    3. 3. The Capital Continuum
    4. 4. Angel Investment Incentive (Small Business Investment Tax Credit) <ul><li>25% tax credit on investment in certified company </li></ul><ul><li>Investment must be made through or alongside a qualified VC or Angel group </li></ul><ul><li>$9 million in credits allocated each year </li></ul>
    5. 5. Pre-seed Funds <ul><li>Over $30 million to: </li></ul><ul><li>SmartZones </li></ul><ul><li>Spark </li></ul><ul><li>Automation Alley </li></ul><ul><li>NextEnergy </li></ul><ul><li>MUCI </li></ul><ul><li>UTEAMED </li></ul><ul><li>BRCC </li></ul>
    6. 6. 21 st Century Commercialization Competition Accelerator Funds <ul><ul><li>In 2006 - Awarded $126.3 million to 78 highly recommended projects </li></ul></ul><ul><ul><li>Targeted Sectors </li></ul></ul><ul><ul><li>$30 million in 2008 </li></ul></ul><ul><ul><li>Loans to for profits </li></ul></ul><ul><ul><li>Follow-on-Fund </li></ul></ul>
    7. 7. 21 st Century Investment Fund, Venture Michigan Fund, Accelerator Fund <ul><li>$300 million to VC, mezzanine, and private equity funds </li></ul><ul><li>Over $600 million in private leverage </li></ul><ul><li>Fund of Fund structure </li></ul><ul><li>Managed by Credit Suisse </li></ul>
    8. 8. <ul><li>Loan Enhancement Programs </li></ul>
    9. 9. MBGF Program <ul><li>Michigan Business Growth Fund </li></ul><ul><li>Helping diversify and strengthen Michigan businesses </li></ul><ul><li>Two programs, one deals with Collateral Value, one with Capacity to Repay (debt service coverage). </li></ul><ul><li>Designed to use public capital to deal with an “access” issue, not a “cost” issue. </li></ul><ul><li>Designed to work with bank policy and regulatory framework for commercial credit. </li></ul><ul><li>One enhancement mechanism per borrower. </li></ul><ul><li>Enormous flexibility in use of proceeds, structural incorporation, type of note, etc…. </li></ul>
    10. 10. MBGF Eligibility <ul><li>Business must be eligible to receive a MEGA tax credit ( manufacturing, wholesale & trade, research & development, high technology, mining, office operations, film & digital media productions ) </li></ul><ul><li>No retail or passive real estate </li></ul><ul><li>Companies with 750 global employees or less. </li></ul><ul><li>Public policy benefit </li></ul><ul><li>100% of loan proceeds must be used in the State of Michigan </li></ul>
    11. 11. Loan Types <ul><li>R/E, FF&E, Working Capital </li></ul><ul><li>Not to be used as a means for partial acquisition between partners. </li></ul><ul><li>Cannot provide assistance for credit facilities supported by SBA and USDA federal guarantees. </li></ul><ul><li>Support for brand new credit facilities only. </li></ul><ul><ul><li>No refinancing of existing lender debt </li></ul></ul><ul><ul><li>No increase in existing credits </li></ul></ul><ul><li>Maximum enhancement of $5MM </li></ul><ul><li>Maximum loan amount of $20MM </li></ul>
    12. 12. Mechanism One - Collateral Support <ul><li>Intended as a gap filling mechanism, not a stand alone asset. </li></ul><ul><li>Can contribute up to 49.9% of the amount of the loan. </li></ul><ul><li>Support value of existing assets and support expansion of debt to finance growth. </li></ul><ul><li>Cash deposit in lending institution, Deposit Agreement tied to specific account & loan. </li></ul><ul><li>Claim in the event of both a default and a deficiency. </li></ul><ul><li>Minimum claim is lesser of actual loss after liquidation of primary collateral or 90% of eligible deposit. </li></ul><ul><li>Fees 1-3% at closing. 1% of eligible balance annually + deposit rate interest. </li></ul>
    13. 13. Mechanism Two- Loan Participation <ul><li>Intended to: </li></ul><ul><ul><li>facilitate projects with a revenue gap </li></ul></ul><ul><ul><li>de-concentrate bank </li></ul></ul><ul><ul><li>reduce debt service demands for a short term period </li></ul></ul><ul><li>Program can purchase up to 49.9% of a commercial credit facility an forego the receipt of interest as well as potentially defer the receipt of principal. </li></ul><ul><li>Pro-Rata and Pari Passu </li></ul><ul><li>Fees are 1-3% at closing. After grace period, bank rate (pro rata) plus an annual fee of 1% of the programs outstanding balance. </li></ul>
    14. 14. Getting started <ul><li>Step 1 </li></ul><ul><ul><li>Contact MEDC staff to discuss proposal. </li></ul></ul><ul><li>Step 2 </li></ul><ul><ul><li>Complete intake and background check forms </li></ul></ul><ul><li>Step 3 </li></ul><ul><ul><li>Submit bank underwriting document along with forms </li></ul></ul>
    15. 15. Export Financing Incentive Program <ul><li>Uses a small amount of public resources to defray the incremental cost difference between domestic and foreign working capital loans. </li></ul><ul><li>Increase business profit by lowering costs </li></ul><ul><li>Induce entry and expansion into foreign markets. </li></ul>
    16. 16. Eligibility <ul><li>Must have a physical facility located in MI </li></ul><ul><li>Business must receive additional loan exposure for financing exports from MI. </li></ul><ul><li>Maximum export loan exposure of $6MM </li></ul><ul><li>Maximum total loan exposure of $20MM </li></ul><ul><li>Maximum 750 global employees </li></ul>
    17. 17. Benefits <ul><li>Up to a maximum $100,000 per company during a 24 month period. </li></ul><ul><li>Reimbursement of up to 50% for A/R Insurance Premiums </li></ul><ul><li>Reimbursement of up to 75% of eligible costs, including: </li></ul><ul><ul><li>Field Exams </li></ul></ul><ul><ul><li>Facility Fees </li></ul></ul><ul><ul><li>Guaranty Fees </li></ul></ul><ul><ul><li>Letter of Credit fees </li></ul></ul>
    18. 18. Additional Guidelines <ul><li>Lender may not pass through reimbursed costs to the borrower. </li></ul><ul><li>Lender to provide a schedule of anticipated reimbursable costs at enrollment </li></ul><ul><li>Loan to be enrolled prior to closing. </li></ul><ul><li>Lender and borrower to certify their adherence to all applicable laws and SSBCI requirements at enrollment. </li></ul>
    19. 19. Enrolling a Loan <ul><li>Lender to submit the following: </li></ul><ul><ul><li>Loan Enrollment form </li></ul></ul><ul><ul><li>Schedule of anticipated eligible costs </li></ul></ul><ul><ul><li>Borrower Assurances </li></ul></ul><ul><ul><li>Copy of the lender’s underwriting approval document </li></ul></ul>
    20. 20. Website: www.michiganadvantage.org [email_address] MEDC Capital Services Team 300 N. Washington Sq. Lansing, MI 48913 Contact Info

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