Convergence Point Solutions
Unlock Capital Efficiency.
Accelerate Business Growth.
Introducing the Alternative Letter of Credit (ALOC) Facility, an efficient, off-balance sheet solution for companies to post collateral for Casualty insurance and self-insurance programs.
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About the ALOC Facility
Convergence Point Solutions has developed a groundbreaking alternative that creates credit capacity outside the traditional banking system.
- Straightforward – companies simply pay a credit-based fee
- Releases existing revolver capacity
- Senior, unsecured and off-balance sheet
$7.5 B+
Transacted by CPS Partners
500+
Companies Assisted by CPS Partners
30 Years
Combined Experience
How it Works
Efficiently post collateral by accessing non-bank credit capacity.
Convergence Point Solution’s ALOC facility creates off-balance sheet credit capacity outside the traditional banking system. Companies pay a credit-based fee, and the Facility arranges for an LOC to be issued by an NAIC-approved bank as collateral for Casualty insurance policies. This releases existing collateral and restores revolver capacity/cash.
Finally, a solution that enables companies to meet and exceed their capital goals through the unique convergence of insurance and financial capital markets.
Apply
The process is simple and straightforward and does not involve the underwriting of claims and losses or the posting of additional collateral. Private companies simply need to provide their most recent audited financial statements and a standard credit underwriting package.
LOC Issued
Companies pay a credit-based fee, and the ALOC Facility arranges for an LOC to be issued by an NAIC-approved Bank. Collateral, typically, may be replaced at any time and does not need to coincide with a policy renewal date.
Leverage Liquidity
Credit capacity is freed up, replacing and releasing existing collateral dollar for dollar.
Collaborative Partners
Facilitated by Industry Leading Experts
Convergence Point Solutions is a strategic partnership between two market leaders, Vanbridge and GreensLedge, aimed at delivering sophisticated financial solutions that anticipate and adapt to market dynamics.
Vanbridge, an EPIC company, is a fully diversified financial services firm that provides products and services at the intersection of the insurance, private equity and hedge fund industries. Specializing in solving risk related issues utilizing insurance and alternative capital structuring technology, Vanbridge bridges the gap between the insurance and capital markets, allowing our clients to not only manage their risk, but also enhance their investment strategies and strengthen their long-term financial performance.
GreensLedge is a global investment banking and advisory firm with vast experience in the structured finance and alternative investment marketplace. GreensLedge has helped clients deliver value worth over $130 billion across traditional capital markets and privately tailored capital raising and financing solutions.
Track Record
The Convergence Point Solutions team has decades of combined experience and a proven track record. In a previous capacity, Quentin Hills led the team that created, implemented and managed similar groundbreaking collateral programs for self-insurers in California and North Carolina.
Both programs continue to be highly successful since their inception in 2003 and 2006 respectively, with CA covering close to $8B of collateral. Additionally, CPS team members have developed over $500MM of efficient collateral and credit solutions for individual companies.
>$7.5 BillionReplaced individual collateral and freed up liquidity and credit lines for a portfolio of 350+ companies – California Self-Insurers’ Security Fund‘s Alternative Security Program (ASP)
~$300 MillionReplaced individual collateral and freed up liquidity and credit lines for a portfolio of ~100 companies – North Carolina Self-Insurance Security Association’s Association Aggregate Security System (AASS)
Frequently Asked Questions
What does the ALOC Facility cost and how is the interest rate determined?
There will be a one-time fee at issuance and an annual fee payable quarterly in arrears. The annual ALOC fee will be informed by both a company’s senior unsecured credit rating and the overall credit market and will be set for the initial term of the ALOC Facility.
Who is the Servicer?
The Servicer is Convergence Point Solutions LLC, a company affiliated with Vanbridge and GreensLedge and is responsible for the administration of the ALOC Facility.
When is it possible to enter and exit the ALOC Facility?
Following the initial launch in December 2023, there will be monthly entry dates until early 2024, when entry dates will move to quarterly on January 1, April 1, July 1, and October 1 each year.
Any increase(s) must be submitted 30 days ahead of quarterly dates and approved by the Servicer. Increase(s) will be subject to the then prevailing market conditions and ALOC Interest Rate schedule.
ALOC is a committed Facility at a fixed price through the Maturity Date. Where companies have successfully reduced the collateral with their insurer, they may apply for a reduction 30 days prior to a quarterly date for no additional fee. However, the whole fee will apply for reductions that are not a result of the insurer reducing collateral.
What is the impact of the ALOC Facility on a company’s balance
sheet and financing covenants?
The ALOC Facility has been designed to be off-balance sheet under GAAP and not impact typical financial covenants in bond and credit facilities. However, we are not tax or accounting experts, and companies should seek their own professional advice regarding the accounting recognition of ALOC and the impact on existing financial covenants.
Can an existing LOC or other collateral be replaced at any time?
Yes, Casualty insurance policies generally allow LOCs or other collateral to be replaced at any time during a policy period by a replacement LOC that has been issued by an NAIC-approved bank. However, companies should check their specific policy terms and conditions.
What happens when an insurer draws on the ALOC?
If an Insurer draws on the LOC, a company will be required to repay the ALOC Facility; otherwise, the Servicer will immediately begin recovery actions, including notifying the applicable insurance company of non-renewal of the LOC.
What happens in the event the ALOC fee is not paid or financial
statements are not provided?
If the ALOC fee is not paid or year-end audited financial statements/ quarterly unaudited (management) financial statements are not provided in a timely manner, companies will be issued with a Default Notice. If not cured, companies will be required to post replacement collateral to the insurer OR post 100% cash collateral to the ALOC Facility.
What happens if a company files for Chapter 11 re-organization?
As is standard now, companies file first day motions to continue to maintain their casualty and other insurance policies, paying claims and premiums when due. Subject to approval from the Bankruptcy Court, the ALOC Facility will remain in place subject to the terms of the facility agreement and assuming continued company compliance.
How is the ALOC Facility being launched?
ALOC is a purpose-built Facility launching in December 2023. Following the launch, companies will be able to join the Facility on a monthly basis.
What is the application process for the ALOC Facility?
Simply fill out the Contact Form at the bottom of the website to get started. The process is simple and straightforward and does not involve the underwriting of claims and losses – just standard credit underwriting. Private companies will need to provide their most recent audited financial statements. On an ongoing basis, all companies must provide audited financial statements and quarterly unaudited (management) financial statements in a timely manner.