Since 1990, financial institutions looking to fulfill CRA requirements and make loans and equity investments in community organizations have chosen BlueHub Capital as a partner. Today, over 25 financial institutions choose us to invest in affordable housing, child care facilities, schools, community health centers, and the rehabilitation of urban commercial real estate.
In addition to our BlueHub Loan Fund and BlueHub SUN investment offerings, we offer financial institutions an equity equivalent (EQ2) product to assist in the capitalization of its affiliates.
Created by the Opportunity Finance Network, Citibank and the Office of the Comptroller of the Currency as a new form of equity for CDFIs, the EQ2 is highly subordinate, below market debt issued for an indeterminate term. EQ2s support CDFIs in two ways. First, the funds are available to be lent and invested in community development projects. Second, by their subordinated nature, EQ2s leverage additional senior debt from other investors. Banks that purchase EQ2s are allowed to receive CRA credit for a proportionate share of the CDFI’s entire lending activity that greatly enhances the CRA credit of the investment. In addition, banks may claim favorable accounting treatment for the EQ2. BCC was the first local CDFI in the country to sell EQ2s and, through our Loan Fund we sell EQ2 to assist in the capitalization of BlueHub Loan Fund.
The terms of the equity equivalents created by BlueHub Capital meet the regulatory requirements for EQ2s. They are issued by our subsidiary BlueHub Loan Fund. The Loan Fund's purposes are to provide direct loans to community based projects and to capitalize affiliated community based financial intermediaries.
EQ2s are subordinate to all other creditors of BlueHub Loan Fund, and the Loan Fund shall not be required to repay if any or all of such repayment should put the Loan Fund out of compliance with any senior creditors, including violation of permanent capital and liquidity requirements (or any such comparable requirements which may exist at the time of maturity.)