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<blockquote data-quote="TexasBred" data-source="post: 876981" data-attributes="member: 6897"><p>...and that shows the calibre of your "deals." It's apparent you don't understand the power of leverage or the capital structure of any substantive project. </p><p></p><p>"Deals" are financed with any equity partner, whom generally brings 40% to the table. This equity partner or mezzanine piece will require upwards of 20% return for the non-collateralized debt capital. </p><p></p><p>The borrower will then take this money to the bank, the senior lender, to pledge against the loan. With the bank's 60% financing, they will hold a primary lean position and the mezzanine's debt will be subordinate. </p><p></p><p>As long as the cost of capital is less than the return, then you needa accept the project. </p><p></p><p>*leverage</p><p>*cost of capital</p><p>*risk premium</p><p></p><p>You may play with this mess but no GOOD banker is going to touch it especially when cattle is concerned. Crap like this is what has gotten our banking industry in the mess it's in now.</p></blockquote><p></p>
[QUOTE="TexasBred, post: 876981, member: 6897"] ...and that shows the calibre of your "deals." It's apparent you don't understand the power of leverage or the capital structure of any substantive project. "Deals" are financed with any equity partner, whom generally brings 40% to the table. This equity partner or mezzanine piece will require upwards of 20% return for the non-collateralized debt capital. The borrower will then take this money to the bank, the senior lender, to pledge against the loan. With the bank's 60% financing, they will hold a primary lean position and the mezzanine's debt will be subordinate. As long as the cost of capital is less than the return, then you needa accept the project. *leverage *cost of capital *risk premium You may play with this mess but no GOOD banker is going to touch it especially when cattle is concerned. Crap like this is what has gotten our banking industry in the mess it's in now. [/QUOTE]
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