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Author Topic: Separate caps for secured & unsecured loans  (Read 682 times)

Offline Sanabas

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Separate caps for secured & unsecured loans
« on: October 15, 2011, 06:31:55 PM »
Secured loans currently count against your unsecured cap.

In JA, I have an unsecured cap of roughly $10 million, and a total cap of $60 million. I won $5 million worth of planes. With 6 million of unsecured loans, 3 million of secured, the bank will only give me $1 million more. Yet if I get my loans out in a different order & rearrange things, the bank will give me an extra $6 million.

That shouldn't happen, and is also unrealistic. Given a particular cashflow and asset situation, a bank will give me the same maximum limit regardless of how I end up there.

If the bank stopped counting secured loans against the unsecured cap, the problem would be fixed. Simply work out the maximum value for total loans, and the maximum value for unsecured loans, the same way it is now. But allow a player with a mix of loans to still take out new, unsecured loans until he reaches the unsecured cap with them, the same way he could if starting without any loans.


I'd also like to see the ability to refinance a secured loan, rather than be forced to pay off $50 million in order to free up $100 million worth of assets to re-use as securities. Basically if you have a secured loan that is partially paid off, then be able to take out another secured loan, using those same securities, so that the total loan amount = the total asset value. Again, this is more realistic (the bank doesn't expect me to pay off 50% of my mortgage as a lump sum in order to use the house as security to borrow extra), and it removes the need for a player to try and fiddle around with loans in order to get the most money out of the bank.

Offline dmoose42

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Re: Separate caps for secured & unsecured loans
« Reply #1 on: October 15, 2011, 06:59:37 PM »
I have mixed feelings about this.  If you are the Bank evaluating a loan, it does make a difference.  If you borrow $50MM in your example against your planes, the Bank must incorporate the burden of that debt into account in considering whether or not they should give you the unsecured loan because presumably the secured assets have a higher claim on the defaulted companies unencombered assets in a liquidation.  If you do the unsecured loan first, you capacity to repay that loan is much higher.

I agree that the current situation can be a little confusing, but given the relative simplistic approach (I haven't the foggiest idea how the simulation comes up with the limits), I think it is conceptually accurate.

As for refinance piece, I agree with the ability to refinance - although in term of things to fix/improve, I would probably put it relatively low on the list.

Offline Sanabas

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Re: Separate caps for secured & unsecured loans
« Reply #2 on: October 15, 2011, 09:16:33 PM »
I have mixed feelings about this.  If you are the Bank evaluating a loan, it does make a difference.  If you borrow $50MM in your example against your planes, the Bank must incorporate the burden of that debt into account in considering whether or not they should give you the unsecured loan because presumably the secured assets have a higher claim on the defaulted companies unencombered assets in a liquidation.  If you do the unsecured loan first, you capacity to repay that loan is much higher.

So, situation A: I've borrowed 8 million from the bank, with no security. They'll give me 2 million more in unsecured loans.

Situation B: Exact same finances, I've borrowed 8 million from the bank, but there's 5 million of planes securing some of it.

You think that in situation B, I'll still only be able to get 2 million more in unsecured loans, that the 5 million of securities they have make no difference at all to their risk assessment?

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I agree that the current situation can be a little confusing, but given the relative simplistic approach (I haven't the foggiest idea how the simulation comes up with the limits), I think it is conceptually accurate.

The limits appear to be based on your revenue, combined with your credit rating. Profit affects credit rating, I don't think that it directly affects loan limits. The limits increase during the week, and are highest on Monday mornings before loan payments are deducted. Which makes me think it looks at the last x week's revenue, including the current week. So your revenue value (and hence loan limit) peaks each Sunday, then drops at midday Monday as the earliest week is dropped, and the 0 current revenue for the new week gets added. That's my guess, anyway. Doesn't matter much how it works, all anyone needs to know is that Sunday night/Monday morning is when you'll have the max available.

I disagree that it's conceptually accurate, and more importantly, I think it's poor from a gameplay perspective. Repaying & taking out new loans on the same day shouldn't allow me to borrow an extra 10 million that they weren't prepared to give me at the start of the day, because my finances haven't changed.

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As for refinance piece, I agree with the ability to refinance - although in term of things to fix/improve, I would probably put it relatively low on the list.

Yep, me too. It can be made pretty simple though (conceptually anyway, programming it to correctly work with loan limits might be more of a pain), all it needs to do is to create a brand new secured loan with brand new terms, give the bank the cash to pay off the old loan completely, and give you the rest.

Offline dmoose42

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Re: Separate caps for secured & unsecured loans
« Reply #3 on: October 15, 2011, 09:24:12 PM »
In the situation you described regarding situation A+B in your response, I agree with.  You have one situation where the loan is 62.5% secured and the other where it is completely unsecured.

However, this is different than what I thought you were saying before.  What in that case, if you have no loans outstanding and borrow an incremental 10MM:  If you first make a $2MM unsecured request on day t, which is funded by the bank and subsequently an $8MM secured request on day t+x, it is different than an $8MM secured request on day t, which is funded by the and subsequently a $2MM unsecured request.  That is different.


Offline Sanabas

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Re: Separate caps for secured & unsecured loans
« Reply #4 on: October 15, 2011, 09:59:54 PM »
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In the situation you described regarding situation A+B in your response, I agree with.  You have one situation where the loan is 62.5% secured and the other where it is completely unsecured.

Currently, A & B are treated identically.


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However, this is different than what I thought you were saying before.  What in that case, if you have no loans outstanding and borrow an incremental 10MM:  If you first make a $2MM unsecured request on day t, which is funded by the bank and subsequently an $8MM secured request on day t+x, it is different than an $8MM secured request on day t, which is funded by the and subsequently a $2MM unsecured request.  That is different.

How is it different, if on day t+x I have the same revenue, the same costs, the same profit? In your first case, I'll arrive at t+x+1 with 10 million of debt, 8 million of it secured. In the second case, I'll also arrive at day t+x+1 with 10 million of debt, 8 million of it secured.

Offline dmoose42

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Re: Separate caps for secured & unsecured loans
« Reply #5 on: October 15, 2011, 10:27:20 PM »
you don't have the same revenue and costs...in that example, you have the debt coverage for the $8MM unsecured loan which must be taken into account, plus the Company's overall leverage is higher, which would make the bank less likely to extend further unsecured credit

Offline Sanabas

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Re: Separate caps for secured & unsecured loans
« Reply #6 on: October 15, 2011, 10:40:43 PM »
I do have the same revenue.

My costs are slightly higher with the extra loan payments, my cash on hand is 6 million higher. But my costs & cash on hand AFTER getting the loan are identical.

I might be missing your point, I dunno.

But the way you've described it, on day t+x+1 my financial situation will be identical either way. 2 million of unsecured debt, 8 million of secured debt, same loan payments, same revenue.

You seem to be saying that the bank is going to look at me, and say that since I need to service my 8 million of secured debt, it's too risky to give me another 2 million unsecured, because I might not make those payments. But they're going to look at my twin, and decide that since he's only servicing 2 million of unsecured debt, there's no worries having him take on another 8 million secured, even though they just told me they weren't comfortable with me being able to service 10 million of debt. That makes no sense to me.

 

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