Patent filed with U.S. Patent Office for the Collateralized Variable Rate Demand Note
Innovation in Structured Finance: The CVRDN Provides New Financial Instrument for Credit-Worthy Companies with Capital Intensive Business Models
CHICAGO [March 27,2003] - Joanne Marlowe, founder of United Financial Technologies ("UFT"), a designer and developer of financial instruments and solutions, files a patent today with the U.S. Patent Office for its newest debt finance instrument - the Collateralized Variable Rate Demand Note ("CVRDN").
“UFT is readily availing to the economic “everyman” tools once reserved for and available only to blue chip companies. These products provide significant annualized savings on capital costs by utilizing the breadth, depth and versatility of the institutional capital marketplace to efficiently raise bulk capital in order to satisfy legitimate financing needs,” comments Joanne Marlowe, Chief Executive Officer, United Financial Technologies.
The CVRDN financial solution will appeal to credit-worthy companies with capital intensive business models that consistently utilize debt financing. The CVRDN is an interest-only instrument which increases cash flow and allows debt capital to be pooled prior to allocation. The CVRDN qualifies for short-term/weekly interest rates over long-term finance commitments through the use of a “put” coordinated with a remarketing function.
The CVRDN is based on the Variable Rate Demand Note ("VRDN") and has similar characteristics, however, and most significantly, the CVRDN gives the note issuer, as the borrower, the freedom to raise its capital in bulk, thereby addressing and covering its credit needs as they may be projected for as long as 24-36 months following the date of note issuance. The interest cost on capital while the borrower is preparing to use the funds in its commercial business is offset by the application of the expertise of a highly qualified selection of interim cash managers that are acting for the benefit of the borrower’s account. Then, as the borrower begins to schedule funding allocations to its normal business operations from the funds raised, one or more Letters of Credit are substituted for the note proceeds held in reserve and under interim cash management. Each Letter of Credit is issued by a commercial bank rated A1 or better and is secured by the underlying assets, collateral or project to which proceeds are being applied by the borrower.
In this way, the borrower is able to incrementally apply the funds raised with the CVRDN as and when needed, self-syndicate the credit underwriting of its commercial operations amongst a variety of banking institutions, and potentially substantially improve its annual cash flow due to the inherent interest savings of the CVRDN and the interest-only feature of the instrument.
United Financial Technologies’ business model includes the creation and implementation of a standardized approach to accessing capital from the institutional capital marketplace for all types of users. For example, the CVRDN would be a natural fit for companies in the following industries: Auto; Equipment Financing & Leasing; Real Estate Development; Real Estate Investment; Manufacturing; Construction; Maritime; Hospitality; Entertainment; Trade Finance; and Land Banking.
United Financial Technologies, a designer and developer of financial instruments and solutions, is a privately held company headquartered in Chicago, Illinois.
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