New Bridge Loan Program Discussed 7/27/11 – Ali

FREQUENTLY ASKED QUESTIONS (FAQ)

AT THE TIME OF BRIDGING FINANCE

1°) Why are you are offering short term leased bank instruments from smaller banks, less well rated than your usual top ten world banks?

Is all about financially empowering its clients (the rich and the not so rich!).

We can do that by providing them with financial tools in alignment with their own financial possibilities.

Because one needs money to make money we believe that providing a way for our clients to obtain the much needed seed capital to be able to enter into our various financial modules is one of our goals, obligations and duties.

So we have moved the necessary assets and funds in smaller banks to be able to cause instruments with face value amounts as low as USD100, 000.00 to be issued.

These instruments (SBLCs) rated BBB are then monetized through various professional discounters at ratios ranging from 45 to 65% of face value.

Large banks “A or better” rated are absolutely not interested in issuing such low denomination instruments.

We have already had a hard time talking them into issuing anything as low as ten million in face value amounts that attempting to go just a fraction lower would have resulted impossible.

Because discounters perceive these small European Banks as a long time risk we obtain the highest possible discounting rates by causing these banks to issue short term instrument such as 90day SBLCs.

Because we do not wish to bore you with legal and technical information you only need to know that banks perceive the format of an SBLC as best suited at the time of collaterizing lines of credit.

This is the reason why we have included 90 day SBLCs into our bridging finance module.

The idea is to provide our clients with the means and the ability to raise funds quickly to the approximate level of USD/€1M in order to be able to take complete advantage of most of our financial modules.

2°) Are you able to cause one of your Prime Banks to come out with an irrevocable and unconditional bank commitment letter to deliver the desired 90day SBLCs in favor of your clients before leasing fees are being paid to you?

A Prime Bank deals and speaks with other Prime Banks.

Prime Banks do not get involved or do not make commitments for and on behalf of much smaller banks especially when they are only BBB rated.

On top of that Prime Banks are expensive to use.

Assuming it was at all possible it would defeat the entire purpose; the cost of the instruments would soar and therefore become too expensive to use.

Because the cash outlay can be as low as USD10, 000.00 we believe clients can take a leap of faith by entrusting us with their leasing fees before we deliver.

3°) This bridging finance module is quite expensive. Don’t you think people will think twice before applying for bridging finance because of that?

In our document entitled “BRIDGING FINANCE IN SHORT” we show how, by monetizing a series of 90day SBLCs, one can finally obtain the resources to cause a five year top ten world bank, bank guarantee to be issued.

We have all gone to our calculating machines and discovered that in this particular case the overall cost of finance for this five year loan was just over 10%!

I believe every one interested must do his math’s and see whether or not this bridging module is fit for his needs or not!

4°) This bridging financing program starts by using the ability that has to cause a series of 90day SBLCs to be issued and further monetized. We also know how crucial it is to be able to quickly monetize larger instruments later in the program so one can successfully lower the overall cost of borrowings. Can help us quickly monetize these larger denomination bank debt instruments?

We offer, in one of our modules to lend money against acceptable bank instruments.

For borrowers who believe this option is unwarranted because not yet tested, or because they are fearful that, at time of issuance of larger denomination instruments, we might not be in a position (out of our menu of banks) to supply them with paper coming from the specific issuing bank their credit line bank is requesting, we are offering them a safety net.

We have the ability to cause any of our top world banks to issue Medium Term Notes or Bonds to be delivered to our clients banking coordinates.

Once on account, these bank instruments can be monetized within three days.

5°) You mean to say you can have an instrument of that size monetized without even moving it from the client’s account?

Yes. That is correct.

We have access to at least eight repo desks of major banks that will Repurchase these instruments within a matter of hours.

6°) What does the word Repo stand for?

Repo’ is the generic term for repurchase agreements (also known as ‘classic repos’) and buy/sell-backs.

7°) Do I have to take your word for this or is there any way I can verify this information beforehand?

If you type the two words “Repurchase Agreement” and conduct a research on the internet you will find a great deal of information on the subject.

We will have your bank officer contacted by one of our bankers in order for you to sign a “Global Master Repurchase Agreement (GMRA)” for the security held on account.

The monetization of the instrument will happen very quickly thereafter.

A Repurchase agreement, also known as a Repo, RP, or Sale and Repurchase Agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price will be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party who originally buys the securities effectively acts as a lender. The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A repo is equivalent to a cash transaction combined with a forward contract. The cash transaction results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan while the settlement date of the forward contract is the maturity date of the loan.

A repo is economically similar to a secured loan, with the buyer (effectively the lender or investor) receiving securities as collateral to protect against default of the seller – the party who initially sells the securities being effectively the borrower. Almost any security may be employed in a repo, though practically speaking highly liquid securities are preferred because they are more easily disposed of in the event of a default and, more importantly, they can be easily secured in the open market where the buyer has created a short position in the repo security through a reverse repo and market sale; by the same token, illiquid securities are discouraged. Treasury or Government bills, corporate and Treasury/Government bonds, and stocks may all be used as “collateral” in a repo transaction. Unlike a secured loan, however, legal title to the securities clearly passes from the seller to the buyer. Coupons (installment payments that are payable to the owner of the securities) which are paid while the repo buyer owns the securities are, in fact, usually passed directly onto the repo seller. This might seem counterintuitive, as the ownership of the collateral technically rests with the buyer during the repo agreement. It is possible to instead pass on the coupon by altering the cash paid at the end of the agreement, though this is more typical of Sell/Buy Backs.

Although the underlying nature of the transaction is that of a loan, the terminology differs from that used when talking of loans because the seller does actually repurchase the legal ownership of the securities from the buyer at the end of the agreement. So, although the actual effect of the whole transaction is identical to a cash loan, in using the “repurchase” terminology, the emphasis is placed upon the current legal ownership of the collateral securities by the respective parties. That said, one of the most important aspects of repos is that they are legally recognized as a single transaction (especially important in the event of counterparty insolvency) but do not count as a disposal and a repurchase for tax purposes.

8°) If I enter into a Repurchase Agreement with any of the financial institutions you recommend, how can I satisfy my obligation of having to return the instrument to the issuing bank fifteen days prior to maturity date and still raise a loan against this bank debt instrument?

It is quite simple.

The “Global Master Repurchase Agreement (GMRA)” you will be invited to sign is a standardized contract.

This Agreement has been produced by The Bond Market Association (“TBMA”) and the International Securities Market Association (“ISMA”). The Agreement has been prepared as a standard form.

We recommend you visit the websites of the “Bond Market Association” (New York, Washington, London) www.bondmarkets.com and of the International Securities Markets Association (Rigistrasse 60, P.O. Box, CH-8033, Zürich, Switzerland) www.isma.org to learn more about this forty page long agreement.

Entering into a repurchase agreement enables you to specifically repurchase your leased bank instrument before its maturity date and return it to the issuing bank.

9°) What are the additional advantages of entering into a Repurchase Agreement?

Because we are able to cause instruments to be issued with accompanying interest coupons, we can achieve very high lending ratios at the time of entering into a repurchase instrument.

You can discount the future interest coupons of the instrument and get a very high lending ratio from the banking institution.

You can make your “Global Master Repurchase Agreement (GMRA)” a recourse or non recourse agreement.

The price at which an asset is repurchased in a repo is equal to the price at which it was sold plus an amount of interest for the use of the cash. The amount of interest is calculated from a market-determined interest rate called the repo rate. Repo rates are lower than deposit rates like LIBOR and EURIBOR because lending cash through a repo is, by virtue of the collateral, less risky than making an unsecured loan. If an asset is strongly in demand, dealers may be willing to offer cheap cash to get hold of it in the repo market (repo rates can fall to zero or even go negative). When this happens to an asset, it is said to be special. In contrast, the normal repo rate is called the GC or general collateral rate (because there is nothing ‘special’ about the asset).