Indemnified Collateral Adapter™

Scenario: HQIA Owner seeks to invest in an Enhancement CPC™ series, requiring the issuance of a Letter of Credit. HQLA Sponsor is willing to cause the issuance of the required Letter of Credit against the HQIA, but the form of HQIA is not consistent with HQLA Sponsor’s investment mandates. In such case, the HQLA Sponsor requests an indemnification that protects its HQLA in the event of an unreimbursed Letter of Credit draw.

HQIA are offered as collateral to an HQLA Sponsor selected by CSS such that HQLA Sponsor will use its HQLA to secure a Letter of Credit on behalf of HQIA Owner

• HQLA are value-protected at all times up to a maximum of 4 times their value.

• HQLA Sponsor has asset substitution optionality at all times.

• HQIA is periodically independently valued by approved firms.

  
  

• Balance Sheet Friendly – HQIA pledge and Letter of Credit may qualify as contingent liabilities and “footnoted”.

  
  

• Typically, 1-, 3-, or 5-year term.

  
  

• In event of default, HQLA Sponsor recovers against the HQIA upon an unreimbursed draw of the Letter of Credit. If HQIA cannot be timely liquidated or produce a shortfall of proceeds to offset at-risk HQLA, HQLA Sponsor may draw upon insurance indemnity and insurer recovers against HQIA.

  
  

• Generally, limited disruption of unlevered fund or portfolio strategies.

  
  

• At term, when there has been no default, Letter of Credit is cancelled and all pledges and collateral assignments are released