. Definition of project finance
. The corporation vs. non-recourse debt analysis
. Participants and motivation
. History and evolution of project finance
. Iron ore mine and pipeline examples
. Basic project finance structure (Greenfield, privatization, expansion)
. The important of accounting conventions (take or pay throughout, keep well, consolidation) in project finance
. Description and examples
. Descriptive types of projects (including projects in the U.S., Europe and emerging markets)
. Examples over time
. How did projects employ the basic principles
. Lender checklist for a typical financing and what sponsors need to know about lenders
. Compare a U.S. case study to the checklist
--- The project finance process
. Beginning of project finance
. Typical time line (6 months to several years)
. Feasibility study and financial modeling
. Roles of the various players
. Risk sharing among the players; how much risk will the lenders accept
. Joint and several, offshore escrow, operating leases, sponsor limits
. Hedging of risks
. Reviewing multiple examples
. Considering the risks, benefits, structures and economics of multiple projects
. International airport
. International gas to power
. Toll road
. Water to power
. Mining project
--- Documentation, rating agencies, loan syndication
. Project documentation for a
. Project documentation for an existing (operating) project
. An outline of the many contracts involved
. The legal puzzle: fitting the contracts together
. Rating agencies' critical role
. Loan syndication (process and issues)
. Considerations for the default scenario
. Examples, case study and risks
. Emerging market Green-field project
. Case study
. Term sheet example (30 pages plus)
. Project benefits from the viewpoint of the various players
. Political and currency risk
--- International
Allianz Private Equity Partners
Barclays Pension Funds Trustees Limited
BP Investment Management Ltd.
Finama PE-Quartilium
Irish National Pensions Reserve Fund
LGT Capital Partners
The Wellcome Trust Ltd.
--- Public Pension Funds
California State Teachers' Retirement System
Canada Pension Board
Los Angeles County Employees Retirement Association
Minnesota State Board of Investments
Pennsylvania State Employees' Retirement System
Virginia Retirement System
--- Financial Institutions
Goldman Sachs & Co.
KeyCorp
Liberty Mutual Group
SVB Capital
--- Foundations and Universities
Georgia Tech Foundation
Harvard University
The William and Flora Hewlett Foundation
Andrew W. Mellon Foundation
University of Notre Dame
Yale University
--- Advisors, Family Office, and
Funds of Funds
Abbott Capital Management
Adams Street Partners
Auda Private Equity
Commonfund Capital
HarbourVest Partners
JPMorgan Asset Management
Pantheon Ventures
Performance Equity Management
--- Corporate Pension Funds
Corning
General Mills
General Motors
SBC Master Pension Trust
Attached please find the terms:
• Worldwide Project Financing
• Funding from $5 Million USD to $300 Million USD
• Funding in 45 to 60 banking days with total requested documents
• Financing approvals within 72-96 hours after total requested documents has been provided by applicant
• Rates between 6.5% - 12.75% 1-30 year fix. Interest Only, NO PPP. Total fees and charges are never more than 6 % of total funding and are settled on a case by case basis during the process. Note: these terms could vary for better or worse
• No minimum credit requirements
• Borrower must provide a solid business plan and exit strategy
• 15-25 % Equity Contribution into the deal is required.
You must remember before submission: Usually when a project is accepted for financing, a professional-quality Business Plan/Executive Summary is required and an official Submission Form signed by a person who has been officially authorized by you’re your company's Board of Directors.
A) Is you Business Plan / Executive Summary complete? Is it at least 15 pages, preferably more? (60-100 is a good size for a full Business Plan, 15-20 is more
suitable for an Executive Summary; always be thorough an complete!).
B) Did you include all financial projections, background information on your management team, cost estimates, descriptions of your product or project, time estimates for completion of construction, and any other relevant information for the Lender?
C) Did you provide official letters or documents to support your Security/ Collateral? Evidence must prove that you have the Security or Collateral to guarantee the principal and the interest on the loan. If you have a standby letter/line of credit from a Top 25 bank equal to or greater than your loan request, that is the best of all; be sure to include all documentation that the guaranteeing bank will give you.
For Project Finance only – Your Submission Form must be complete, and signed by a person with legal authority to do so.
A) Did you state the exact amount you need?
B) Did you include your business plan, Perfoma, Resume's of Principles, Marketing Plan, Exit Strategy, & Evidence of Funds, signed by the head of your company, which authorizes you to sign legally binding documents on behalf of your company?
Borrowers who understand the importance of good documentation and good collateral, will almost always obtain good financing and excellent interest rates, no matter how large the loan is, and no matter what the purpose. It is essential that the borrower "think from the Lender's point of view." If you were a Lender, you would want to be absolutely sure that you would be repaid your money, even in the extremely rare or worst case of a disaster, bankruptcy, etc. by the borrower. Give the Lender maximum confidence and assurance that he will not lose his money by lending to you. He should feel comfortable with the lending of his money.
IN PRACTIVE, ONLY ORIGINAL BOUND COPIES OF BUSINESS PLANS ARE ACCEPTED
(No facsimiles or email copies are usually accepted in the market place)
Selection of the lenders depends on what kind of project you may have, the amount of money you are requesting and the risk factor associated with your venture.
26 GE Structured Finance Group --
http://www.geengineleasing.com/finance.asp
27 The Bank of New York Mellon --
http://www.bankofny.com/CpTrust/prd_gsf.htm
28 Ernst & Young --
http://www.ey.com/global/content.nsf/India/DCRS_-_Structured_Finance
29 J.P. Morgan --
http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/equities/derivatives/products/efsf
30 Hunton & Williams – Attorney at Law --
http://www.hunton.com/practices/practice_detail.aspx?gr_H4ID=907
31 Standard Chartered Group – Wholesale banking --
http://wholesalebanking.standardchartered.com/en/capabilities/corporatefinance/Pages/structuredfinance.aspx
32 Export-Import Bank of the United States --
http://www.exim.gov/products/guarantee/proj_finance.cfm
Attached please find the terms:
• Worldwide Project Financing
• Funding from $5 Million USD to $300 Million USD
• Funding in 45 to 60 banking days with total requested documents
• Financing approvals within 72-96 hours after total requested documents has been provided by applicant
• Rates between 6.5% - 12.75% 1-30 year fix. Interest Only, NO PPP. Total fees and charges are never more than 6 % of total funding and are settled on a case by case basis during the process. Note: these terms could vary for better or worse
• No minimum credit requirements
• Borrower must provide a solid business plan and exit strategy
• 15-25 % Equity Contribution into the deal is required.
You must remember before submission: Usually when a project is accepted for financing, a professional-quality Business Plan/Executive Summary is required and an official Submission Form signed by a person who has been officially authorized by you’re your company's Board of Directors.
A) Is you Business Plan / Executive Summary complete? Is it at least 15 pages, preferably more? (60-100 is a good size for a full Business Plan, 15-20 is more suitable for an Executive Summary; always be thorough an complete!).
B) Did you include all financial projections, background information on your management team, cost estimates, descriptions of your product or project, time estimates for completion of construction, and any other relevant information for the Lender?
C) Did you provide official letters or documents to support your Security/Collateral? Evidence must prove that you have the Security or Collateral to guarantee the principal and the interest on the loan. If you have a standby letter/line of credit from a Top 25 bank equal to or greater than your loan request, that is the best of all; be sure to include all documentation that the guaranteeing bank will give you.
For Project Finance only – Your Submission Form must be complete, and signed by a person with legal authority to do so.
A) Did you state the exact amount you need?
B) Did you include your business plan, Perfoma, Resume's of Principles, Marketing Plan, Exit Strategy, & Evidence of Funds, signed by the head of your company, which authorizes you to sign legally binding documents on behalf of your company?
Borrowers who understand the importance of good documentation and good collateral, will almost always obtain good financing and excellent interest rates, no matter how large the loan is, and no matter what the purpose. It is essential that the borrower "think from the Lender's point of view." If you were a Lender, you would want to be absolutely sure that you would be repaid your money, even in the extremely rare or worst case of a disaster, bankruptcy, etc. by the borrower. Give the Lender maximum confidence and assurance that he will not lose his money by lending to you. He should feel comfortable with the lending of his money.
IN PRACTIVE, ONLY ORIGINAL BOUND COPIES OF BUSINESS PLANS ARE ACCEPTED
(No facsimiles or email copies are usually accepted in the market place)
Selection of the lenders depends on what kind of project you may have, the amount of money you are requesting and the risk factor associated with your venture.
26 GE Structured Finance Group --
http://www.geengineleasing.com/finance.asp
27 The Bank of New York Mellon --
http://www.bankofny.com/CpTrust/prd_gsf.htm
28 Ernst & Young --
http://www.ey.com/global/content.nsf/India/DCRS_-_Structured_Finance
29 J.P. Morgan --
http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/equities/derivatives/products/efsf
30 Hunton & Williams – Attorney at Law --
http://www.hunton.com/practices/practice_detail.aspx?gr_H4ID=907
31 Standard Chartered Group – Wholesale banking --
http://wholesalebanking.standardchartered.com/en/capabilities/corporatefinance/Pages/structuredfinance.aspx
32 Export-Import Bank of the United States --
http://www.exim.gov/products/guarantee/proj_finance.cfm
Bank Instruments
Picture the world at war in 1944. All of Europe, except for Switzerland, is pounding its infrastructure, manufacturing base and population into rubble and death. Asia is locked into a monumental straggle which is destroying Japan, China, and the Pacific Rim countries. North Africa, the Baltic's, and the Mediterranean countries are clutched in a life and death struggle in the fight to throw off the yoke of occupation. A world gone mad! Economic destruction, mad, human misery and dislocation exists on a scale never before experienced in human history. What went wrong? How could the world rebuild and recover from such devastation? How could another war be avoided?
Keynes, Harry White and Bretton Woods
This was the world as it existed in July 1944 when a relatively small group of 130 of the western worlds most accomplished economic, social and political minds met in upstate New Hampshire at a small vacation town called Bretton Woods. John Maynard Keynes, the man who had predicted the current catastrophe in his book, The Economic Consequences of the Peace, written in 1920, was about to become the principal architect of the post-World War II reconstruction Keynes presented a rather radical plan to rebuild the worlds economy, and hopefully avoid a third world war. This time the world listened, for Keynes and his supporters were the only ones who had a plan that in any way seemed grand enough in foresight and scope to have a chance at being successful. Yet Keynes had to fight hard to convince those rooted in conventional economic theories and partisan political doctrines to adopt his proposals. In the end, Keynes was able to sell about two-thirds of his proposals through sheer force of will and the support of the United States Secretary of the Treasury, Harry Dexter White.
At the hart of Keynes proposals were two basic principals: first the Allies must rebuild the Axis Countries, not exploit them as had been done after WW 1; second, a new international monetary system must be established, headed by a strong international banking system and a common world currency not tied to a gold standard.
Keynes went on to reason that Europe and Asia were in complete economic devastation with their means of production seriously crippled, their trade economies destroyed and their treasuries in deep dept. If the world economy was to emerge from its current state, it obviously needed to expand. This expansion would be limited if paper currency were still anchored to gold.
The United States, Canada, Switzerland and Australia were the only industrialized western countries to have their economies, banking systems and treasuries intact and fully operational. The enormous issue at the Bretton Woods Convention in 1944 was how to completely rebuild the European and Asian economies on a sufficiently solid basis to foster the establishment of stable, prosperous pro-democratic governments.
At the time, the majority of the world's gold supply, hence its wealth, was concentrated in the hands of the United States, Switzerland and Canada. A system had to be established to democratize trade and wealth; and redistribute, or recycle, currency from strong trade surplus countries back into countries with weak or negative trade surpluses. Otherwise, the majority of the world's wealth would remain concentrated in the hands of a few nations while the rest of the world would remain in poverty.
Keynes and White proposed that the United States supported by Canada and Switzerland would become the banker to the world, and the U.S. Dollar would replace the pound sterling as the the medium of international trade. He also suggested that the dollar's value be tied to the good faith and credit of the U.S. Government not to gold or silver, as had traditionally been the support for a nation's currency.
Keynes concept of how to accomplish all of this was radical for its time, but was based upon the centuries old framework of import/export finance. This form of finance was used to support certain sectors of international commerce which did not use gold as collateral, but rather their own good faith and credit, backed by letters of credit, avals, or guarantees.
Keynes reasoned that even if his plans to rebuild the world's economy were adopted at the Bretton Woods Convention, remaining on a Gold standard would seriously restrict the flexibility of governments to increase the money supply. The rate of increase of currency would not be sufficient to insure the continued successful expansion of international commerce over the long term. This condition could lead to a severe economic crisis, which, in turn, could even lead to another world war. However, the economic ministers and politicians present at the convention feared loss of control over their own national economies, as well as, run-away inflation, unless a
"hard-currency" standard were adopted.
The Convention accepted Keynes' basic economic plan, but opted for a gold-backed currency as a standard of exchange. The "official" price of gold was set at its pre-WW II level of $ 35.00 per ounce One U.S. Dollar would purchase 1/35 an ounce of gold. The U.S. dollar would become the standard world currency, and the value of all other currencies in the western. non-communist world would be tied to the U.S. dollar as the medium of exchange.
Marshall plan - lMF - World Bank and Bank of International Settlements
The Bretton Woods Convention produced the Marshall Plan, the Bank for Reconstruction and development known as the World Bank. the International Monetary Fund (IMF) and the Bank of International Settlements (BIS). These four would re-establish and revitalize the economies of the western nations. The World Bank would borrow from rich nations and lend to poorer nations. The IMF working closely with the World Bank, with a pool of funds, controlled by a board of governors. would initiate currency adjustments and maintain the exchange rates among national currencies within defined limits. The Bank of International Settlements would then function as a "central bank" to the world.
The International Monetary Fund was to be a lender to the central bank of countries which were experiencing a deficit in the balance of payments. By lending money to that country's central bank, the IMF provided currency, allowing the underdeveloped country to continue in business. building up is export base until it achieved a positive balance of payments. Then, that nation's central bank could repay the money borrowed from the lMF, with a small amount of interest and continue on its own as an economically viable nation. If the country experienced an economic contraction, the IMF would be standing ready to make another loan to carry it through.
Bank of International Settlements
The Bank of International Settlements (BIS) was created as a new central bank to the central banks of each nation. It was organized along the lines of the U.S. Federal Reserve System and it's principally responsible for the orderly settlement of transactions among the central banks of individual countries. In addition, it sets standards for capital adequacy among the central banks and coordinates the orderly distribution of a sufficient supply of currency in circulation necessary to support international trade and commerce.
The Bank of International Settlements is controlled by the Basel Committee which is comprised of ministers sent from each of the G-10 nations central banks. It has been traditional for the individual ministers appointed to the Basel Committee to be the equivalent of the New York "Fed's" chairperson controlling the open market desk.
World Bank
The World Bank, organized along more traditional commercial banking lines was formed to be lender to the world" initially to rebuild the infrastructure, manufacturing and service sectors of the European and Asian Economies, and ultimately to support the development of Third World nations and their economies. The depositors to the World Bank are nations rather than individuals. However, the Bank's economic "ripple system" uses the same general banking principles that have proven effective over centuries.
The tie that binds: The Bank of International Settlements and the World Bank
The directors of both banks are controlled by the ministers from each of the G-10 countries: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and Luxembourg.
Bretton Woods under pressure
By 1961, the plans adopted at the Bretton Woods convention of 1947 were succeeding beyond anyone's expectation. Proving that Keynes was right. Unfortunately, Keynes was also right in his prediction of a world monetary crisis. It was brought on by a lack of sufficient currency (U.S. dollars) in world circulation to support rapidly expanding international commerce. The solution to this crisis lay in the hands of the Kennedy Administration, the U.S. Federal Reserve Bank and the Bank of International Settlements. The world needed more U.S. Dollars to facilitate trade. The U.S. was faced with a dwindling gold supply to back such additional dollars. Printing more dollars would violate the gold standard established by the Bretton Woods agreements. To break the treaty would potentially destroy the stable core at the center of the worlds economy, leading to international discord, trade wars, lack of trust and possibly to outright war. The crises was further aggravated by the belief that the majority of the dollars then in circulation was not concentrated in the coffers of sovereign governments, but rather in the vaults or treasuries of private banks, multinational corporations, private businesses and individual personal bank accounts. A mere agreement or directive issued by governments among themselves would not prevent the looming crisis. Some mechanism was needed to encourage the private sector to willingly exchange their U.S. Dollar currency holdings for some other form of money.
The problem was solved by using the framework of a forfeit finance; a method used to underwrite certain import/export transactions which relies upon the guarantee or aval (a form of guarantee under Napoleonic law) issued by a major bank in the form of either documentary or standby letters of credit or bills of exchange which are then used to assure an exporter of future payment for the goods or services provided to an importer. The system was well established and understood by private banks, government and the business community world wide. The documents used in such financing were standardized and controlled by international accord, administered by the members of the International Chamber of Commerce (ICC) headquartered in Paris. There would be no need to create another world agency to monitor the system if already approved and readily available documentation, laws and procedure provided by the ICC were adopted. The International Chamber of Commerce is a private, non-governmental, worldwide organization, that has evolved over time into a well recognized organized, respected and, most of all, trusted association. Its members include the worlds major banks, importers, exporters, merchants, and retailers who subscribe to well-defined conventions, bylaws, and codes of conduct over time, the ICC has hammered out pre-approved documentation and procedures to promote and settle international commercial transactions.
In the ICC and forfeit systems lay the seeds of a resolution to the looming crisis. Recycling the current number of dollars back into world commerce would solve the problem by avoiding the printing of more U.S. dollars and would leave the Bretton Woods Agreement intact. If currency, dollars, could be drawn back into circulation through the private international banking system and redistributed through the well known "bank ripple effect", no new dollars would need to be printed, and the world would have an adequate currency supply. The private international banking system required an investment vehicle which could be used to access dollar accounts, thereby recycling substantial dollar deposits. This vehicle would have to be viewed by the private market to be so secure and safe that it would be comparable with U.S. Treasuries which had a reputation for instant liquidity and safety. Given the "newness" of whatever instrument might be created, the private sector would prefer to exchange their dollars for a "proven" instrument (United States Treasuries) but selling new Treasury issues would not solve the problem. In fact, it would exacerbate the looming crisis by taking more dollars out of circulation. The World needed more dollars in circulation.
The answer was to encourage the most respected and creditworthy of the world's private banks to issue a financial instrument guaranteed by the full faith and credit of the issuing bank, with the support from the central banks, lMF and Bank of International Settlements. The worlds private investment and business sector would view new investments issued in this manner as "safe". To encourage their purchase over Treasuries, the investor yield on the new issues would have to be superior to the yield on Treasuries. If the instruments could be viewed as both safe and providing superior yields over Treasuries, the private sector would purchase these
instruments without hesitation.
The crisis was prevented by encouraging the international private banking sector to issue letters of credit and bank guarantees, in large denominations, at yields superior to U.S. Treasuries. To offset the increased "cows" to the issuing banks, due to the higher yields accompanying these bank instruments, banking regulations within the countries involved were modified in such a way as to encourage and or allow the following:
Reduced reserve requirements via off-shore transactions.
Support of the program by the central banks. World Bank, IMF and Bank of International Settlements.
Off-balance sheet accounting by the banks involved.
Instruments to be legally ranked "para passu" (on the same level) with depositors funds.
The banks obtaining these depositor funds would be allowed to leverage these funds with-the applicable central bank of the country of domicile in such a way as to obtain the equivalent of federal funds at a much lower cost. When these "leveraged funds'" are blended with all other accessed funds, the overall blended rate cost of funds to the issuing bank is substantially diminished, thus offsetting the high yield given to attract the investor with substantial funds to deposit.
The bank instruments offered to investors were sold in large denominations often $100 million through a well established and very efficient market mechanism, substantially reducing the cost of accessing the funds, The reduced costs offset the higher yields paid by the issuing banks.
Multi-use Instrument
Major commercial banks soon came to realize that these instruments could serve as more than a "funds recycling and redistribution tool", as originally envisioned.
For the issuing bank, they could provide a the means of resolving two of the bankers major problems: interest rate risks over the term of the loan, and disintegration of depositor funds. Bankers, now for the first time, had available a reliable method of accessing large amounts of money in a very cost efficient manner. These funds could be held as deposits at a predetermined cost over a specific period of time. This new system to promote currency redistribution had also given private banks a way to pass on to third parties the interest rate and disintegration risks formerly borne by the bank.
The use of these instruments providing instant liquidity and safety has worked amazingly well since 1961. It is one of the principal factors which has served to prevent another financial crisis in the world economies.
In recent years, smaller banks not ranked among the top 100 have been issuing their own instruments. Considering the dollars volume and the number of instruments issued daily, the system has worked extremely well. There have been few instances where a major bank has had financial problem. In all cases, the central bank of the G-10 country concerned and the Bank of International Settlements have moved quickly to financially stabilize the bank, insuring its ability to honor its commitments. Funds invested in these instruments rank para passu with depositors accounts, and as such, their integrity and protection is considered by all the institutions involved as fundamental to a sound international banking system.
The bank instruments program designed under the Kennedy Administration is still used very effectively to assist in recycling and redistributing currency to meet the worlds demand for commerce.
Insufficient gold supply
Another significant change of the Bretton Woods Agreement came in 1971, when the volume of world trade using U.S. dollars as the medium of exchange,. finally exceeded the ability of the United States to support its currency with gold. The restraints of the gold standard at $35 per ounce established under the Bretton Woods Agreements placed the United States in a very precarious position. As Keynes had predicted, there was not enough gold in the U.S. Treasury to back the actual number of U.S. dollars then in circulation. In fact, the treasury was not really sure how many paper dollars actually were in circulation. What they did how, however, was that there was not enough gold in Fort Knox to back them. The problem was that the U.S. Treasury was not the only institution aware of this fact. All G-10 countries were aware of this. If demand were placed upon the U.S. Treasury at any one time to exchange all the Eurodollars for gold, the U S. Treasury would have had to default, thereby effectively bankrupting the United States government.
France, the United Kingdom, Germany and Japan were concerned about their substantial holdings in U.S. dollars. If just one of these countries demanded gold for dollars. Then a meeting between ambassadors to the U.S took place with Connelly ,who was then Secretary of the U.S. Treasury, and Undersecretary of the Treasury, Paul Volker. Connelly listened to the ambassador and said, " I will answer you tomorrow".
Nixon, Connolly and Volker, in an ultra-secret weekend meeting with the brightest of the nation's bankers and economists gathered to ponder "tomorrow's" answer.
Honoring the demand meant certain death to the U.S. as an economic super power. Not meeting the demand would have catastrophic results. Was there a way out?
What if the U.S. unilaterally abandoned the gold standard and let its currency float in the market? Nixon and his advisors viewed the dilemma in terms of two mutually-exclusive alternatives: increasing the value of U.S. gold reserves and maintaining a gold-backed economy, or considering the repercussions to the worlds economies if the U.S. dollar were no longer backed by gold.
To resolve the crisis, the U.S. needed to unilaterally abandon efforts to maintain the official price of gold at an artificial level of $35 per ounce the same price that existed in 1933. Gold in 1971 had a market value of approximately $350 to $400 per ounce in the commercial world market, or about 10 times the official price. By letting gold seek its market price, the U.S. Treasury's gold would automatically become worth approximately 10 times its value at the official price. Under these circumstances, any government bank or private investor would have to exchange $350 to $400 U.S. dollars for an ounce of gold at the market price rather than one U.S. dollar to acquire 1/35th of an ounce of gold at the old official price. An ounce of gold would rise in exchange value by a factor of ten, and the U.S. Treasury's gold supply would increase correspondingly.
In addition, once the gold standard established at Bretton Woods at $35 per ounce was abandoned, why reestablish it at $350 an ounce? The same problem would eventually arise again, and Keynes would be right again. Why not adopt Keynes' original idea of a currency, being backed by the good faith and credit of its government, its people, the national resources and its production capacity? The United States needed to let its currency "float" in value against all other world currencies and not tie it to gold. Market forces would set the dollar's value through its exchange rate with other foreign currencies. Nixon and his advisors also realized that business world-wide had long ceased conducting international trade through gold and silver exchanges. Therefore, taking the dollar off the gold standard and allowing its value to float in relation to other world currencies would create currency risks for international trade transactions, but it would not preclude or stall international commerce. The world of international business had, in practice, already abandoned the gold standard years before, considering it cumbersome and unworkable. Moreover, the other Western nations had neither the economic nor military power to force the U.S. to honor its commitment to the gold standard and, therefore, could not prevent it from abandoning the standard.
Based upon a clear understanding of these two interrelated realities. Nixon and his advisors determined to abandon the gold standard and allow the U.S. dollar to "float" in relation to other nations' currency. The exchange rate would no longer be determined by an artificially-maintained gold standard, but rather by the value placed on each currency in the foreign exchange market
Nixon and Kennedy
The system for controlling currency supply, established by the Kennedy Administration, became an indispensable tool to the Nixon administration. The IMF and the Bank of International Settlements insured that the U.S. dollar would hold its value in the international market and was recycled from countries with a positive balance of payments back into the world economy. The illusion of U.S. dollar backed by gold was gone.
The preceding information explains the use of bank instruments as an alternative investment vehicle to United States government notes, and how and why the process of issuing bank instruments used in trading programs began and continues today.
WORLD TOP 25 Current Rank BANK Assets US$m + or -(local curr) Capital US$m Balance Sheet
1 UBS AG , Zürich , Switzerland *1,963,227 +16.43% 172.85 31.12.06
2 Barclays PLC, London, UK *1,951,041 +7.84% 3,198.28 31.12.06
3 The Royal Bank of Scotland Group plc, Edinburgh, UK *1,705,680 +12.18% 1,595.22 31.12.06
4 Deutsche Bank AG , Frankfurt am Main , Germany *1,485,008 +13.51% 1,770.83 31.12.06
5 BNP Paribas SA , Paris , France *1,483,934 +38.87% 11,442.56 31.12.05
6 The Bank of Tokyo-Mitsubishi UFJ Ltd , Tokyo , Japan *1,362,598 - 8,449.64 31.03.06
7 ABN AMRO Holding NV , Amsterdam , Netherlands *1,301,508 +12.06% 1,430.64 31.12.06
8 Soci été Générale , Paris La Défense , France *1,261,657 +14.57% 760.81 31.12.06
9 Cr édit Agricole SA , Paris , France *1,251,997 +30.19% 20,665.25 31.12.05
10 Bank of America NA , Charlotte , USA *1,196,124 +10.52% 2,878.89 31.12.06
11 JPMorgan Chase Bank National Association , New York , USA *1,179,390 +16.31% 1,785.00 31.12.06
12 Banco Santander Central Hispano SA , Santander , Spain *1,099,516 +3.06% 4,123.35 31.12.06
13 UniCredito Italiano SpA , Milan , Italy *1,085,554 +4.57% 6,404.20 31.12.06
14 Credit Suisse Group , Z ürich , Switzerland *1,028,882 -6.21% 497.26 31.12.06
15 Citibank NA , New York , USA *1,019,497 +44.30% 751.00 31.12.06
16 ING Bank NV , Amsterdam , Netherlands *983,764 +34.51% 619.25 31.12.05
17 Bank of Scotland , Edinburgh , UK *890,936 +22.59% 853.40 31.12.06
18 Fortis Bank NV/SA , Brussels , Belgium *889,624 +5.20% - 31.12.06
19 Sumitomo Mitsui Banking Corporation , Tokyo , Japan *884,978 +7.12% 5,635.95 31.03.06
20 HSBC Bank plc , London , UK *862,713 +14.06% 1,559.99 31.12.06
21 Commerzbank AG , Frankfurt am Main , Germany *802,135 +36.74% 2,248.15 31.12.06
22 Industrial & Commercial Bank of China Limited , Beijing , China 789,793 +28.16% 30,730.34 31.12.05
23 Intesa Sanpaolo SpA , Milan , Italy *760,527 - 8,723.63 31.12.06
24 Rabobank Nederland , Utrecht , Netherlands *733,722 +9.85% - 31.12.06
25 Caisse Nationale des Caisses d'Epargne et de Pr évoyance , Paris , France *711,644 -12.18% 5,214.93 31.12.06
Example
Client, has a project requiring 10,000,000 USD. Client has 1,500,000 USD available in capital.
Lending Program Steps
1. Submission Form
The Submission Form is a simple 4 page form, dealing mainly with contact information and your project and we allow you to specify your ideal terms. In addition, please e-mail your completed Business plan including, Proforma, Resume’s, Marketing Plan, Exit Strategy and Evidence of funds.
2. Underwriting Process - Please allow 48-72 Banking hours for Underwriting
A conference call will be scheduled to review the project in detail. Depending on the outcome of that conference call, you may be given the clear to wire and we will draw up our intent to fund memorandum within 24 hours.
3. Application Approved –Intent to Fund Memorandum sent out (24 Banking hours)
Applicants are approved based upon the strength of the project and of the principals. Since this loan is a non-recourse to the project, XXX will carefully select its borrowers based on the experience of the principals, their financial strength, and their clear ability to execute this project to completion. 15% Equity contribution is required for all loans both debt and equity financed. This will be made available to XXX to leverage a financial instrument and create the assets needed to finance your project. We are concerned with credit, financials, future values, income verification, and background checks however, conventional underwriting guidelines do not apply.
4. Approval Executed by Borrower (5 Banking days)
The Approval will outline the process and describe the responsibilities that each party is held to. It also contracts the scope of the transaction as well as the end terms for the project.
Terms of the loan are as follows:
Deposit – 15% equity contribution needed
Pre-paid Interest – 12 Months - 36 month
No payments Due for first year
Interest Rate: 6.5% - 7.75%
Amortization – 30 Year fixed
Interest Only Payments
10 Year Balloon
No Pre-payment penalty.
5. Account Funded (3 Banking days)
The attorney escrow account is funded with 15% of the total loan amount requested. All fees are earned to brokers out of the proceeds of the loan. The agreed upon amount of capital contribution that was placed with XXX and is fully refundable at the close of the transaction (initial 1.5M).
6. Financial Instrument Secured (20 Banking Days)
Our costs to use an instrument varies from 4%-18% of the face amount of the financial instrument. All of the underwriting is done in-house by one of our underwriters and we make the final decisions whether to fund your project before any approvals are issued.
Per the instrument provider’s procedures the instrument is issued and placed on Euroclear/DTC for viewing/blocking. Some providers will use 4% others will charge 18% of the face amount of the instrument to be secured for their costs relating to issuing. In our example 15% secures the face value of the instrument which is then presented to the lender to attain the highest LTV upon monetization of the instrument. Once the instrument has been issued and (normally 15 Banking days), the instrument is placed in escrow to be loaned upon by our credit facility.
7. Monetization (15 Banking Days)
Our Credit Facility monetizes (loans upon) the financial instrument with the funds placed into XXX’s Account. The Credit Facility completes the transaction within 15 banking days. The remainder of the funds are released back to the XXX upon monetization and subsequently returned to the principal of the project upon funding.
8. Funds Disbursed for your Project (3 Banking Days)
The funds are disbursed to you for your project as per the Approval and the note. All funds not disbursed to you for your project directly, but are disbursed to the XXX to mitigate project risk and attain profitability. The Instrument is taken out in the name of XXX making the borrower not liable retiring the instrument upon expiration. The XXX will retire the instrument after a year and one day, however may have the option to extend the Instrument for additional premium. This means that with any over funded amounts, XXX is able to introduce this capital to its trade platform for investment purposes.
This is how we are able to remain profitable and offer such competitive terms to commercial ventures. As you can see, through significant leverage, a truly unique funding program has been created. Please allow 60 days for project to be funded.
--- Concepts
. Definition of project finance
. The corporation vs. non-recourse debt analysis
. Participants and motivation
. History and evolution of project finance
. Iron ore mine and pipeline examples
. Basic project finance structure (Greenfield, privatization, expansion)
. The important of accounting conventions (take or pay throughout, keep well, consolidation) in project finance
. Description and examples
. Descriptive types of projects (including projects in the U.S., Europe and emerging markets)
. Examples over time
. How did projects employ the basic principles
. Lender checklist for a typical financing and what sponsors need to know about lenders
. Compare a U.S. case study to the checklist
--- The project finance process
. Beginning of project finance
. Typical time line (6 months to several years)
. Feasibility study and financial modeling
. Roles of the various players
. Risk sharing among the players; how much risk will the lenders accept
. Joint and several, offshore escrow, operating leases, sponsor limits
. Hedging of risks
. Reviewing multiple examples
. Considering the risks, benefits, structures and economics of multiple projects
. International airport
. International gas to power
. Toll road
. Water to power
. Mining project
--- Documentation, rating agencies, loan syndication
. Project documentation for a
. Project documentation for an existing (operating) project
. An outline of the many contracts involved
. The legal puzzle: fitting the contracts together
. Rating agencies' critical role
. Loan syndication (process and issues)
. Considerations for the default scenario
. Examples, case study and risks
. Emerging market Green-field project
. Case study
. Term sheet example (30 pages plus)
. Project benefits from the viewpoint of the various players
. Political and currency risk
FinanceOne_101
Private Money For Real Estate Projects
Minimum $5 Million. Worldwide. Development, Construction, Infrastruct.
FinanceOne_102
Commercial R. Estate Transaction Funding
Minimum $5 Million. Worldwide. Acquisition, Refinancing, Construction.
FinanceOne_103
Global Fund Finances Real Estate Project
Minimum $5 Million. Worldwide. Construction, Infrastructure, Developm.
FinanceOne_104
We Finance Real Estate Projects. World
Minimum $5 Million. Development, Construction, Infrastructure, etc.
FinanceOne_105
We Finance Commercial Real Estate. World
Minimum $ 5 Million. Acquisition, Refinancing, Construction, etc.
FinanceOne_106
We Finance Large RE Projects. Worldwide
Minimum $30 Million. RE Development, Construction And Infrastructure.
FinanceOne_107
Private Lenders Finance Commercial RE
Minimum $5 Million. Worldwide. Acquisition, Refinancing, Development.
FinanceOne_108
Funding For RE Projects. Private Banks
Minimum $5 Million. Worlwide. Development, Construction, Infrastruct.
FinanceOne_109
We Provide Financing. RE Transactions
Minimum $30 Million. Worldwide. Acquisition, Refinancing, etc.
FinanceOne_110
Financing For Large Scale RE Investments
Minimum $30 Million. Worldwide. Development, Construction, etc.
FinanceOne_111
Dinero Privado Para Proyectos Inmuebles
Mínimo $30 Millones. Urbanización, Construcción, Infraestructura, etc.
FinanceOne_112
Financiamos Transacciones De Inmuebles
Mínimo $5 Millones. Compra, Refinanciamiento, Construcción, Mejora.
FinanceOne_113
Fondo Financia Proyectos Inmuebles
Mínimo $5 Millones. Construcciones, Infraestructura, Urbanizaciones.
FinanceOne_114
Financiamos Proyectos De Bienes Raíces
Mínimo $5 Millones. Urbanizaciones, Construcciones, infraestructuras.
FinanceOne_115
Financiamos Bienes Raíces Comerciales
Mínimo $5 Millones. Adquisiciones, Refinanciamiento, Construcciones.
FinanceOne_116
Financiamos Grandes Proyectos Inmuebles
Mínimo $30 Millones. Urbanizaciones, Construcciones e Infraestructura.
FinanceOne_117
Prestamista Privado Financia Inmuebles
Mínimo $5 Millones. Adquisiciones, Refinanciamiento, Urbanizaciones.
FinanceOne_118
Financiamos Proyectos. Bancos Privados
Mínimo $5 Millones. Urbanizaciones, Mejoras, Construcciones, Puentes.
FinanceOne_119
Proveemos Financiamiento De Inmuebles
Mínimo $30 Millones. Adquisición, Refinanciamiento, Mejoras, Caminos.
FinanceOne_120
Financiamiento De Grandes Inmobiliarias
Mínimo $30 Millones. Urbanizaciones, Construcciones, Caminos, Puentes.
--- Advisors, Family Office, and Funds of Funds
Abbott Capital Management
Adams Street Partners
Auda Private Equity
Commonfund Capital
HarbourVest Partners
JPMorgan Asset Management
Pantheon Ventures
Performance Equity Management
--- Corporate Pension Funds
Corning
General Mills
General Motors
SBC Master Pension Trust
--- Financial Institutions
Goldman Sachs & Co.
KeyCorp
Liberty Mutual Group
SVB Capital
--- Foundations and Universities
Georgia Tech Foundation
Harvard University
The William and Flora Hewlett Foundation
Andrew W. Mellon Foundation
University of Notre Dame
Yale University
--- International
Allianz Private Equity Partners
Barclays Pension Funds Trustees Limited
BP Investment Management Ltd.
Finama PE-Quartilium
Irish National Pensions Reserve Fund
LGT Capital Partners
The Wellcome Trust Ltd.
--- Public Pension Funds
California State Teachers' Retirement System
Canada Pension Board
Los Angeles County Employees Retirement Association
Minnesota State Board of Investments
Pennsylvania State Employees' Retirement System
Virginia Retirement System
Usually when a project is accepted for financing, a professional-quality Business Plan/Executive Summary is required and an official Submission Form signed by a person who has been officially authorized by you’re your company's Board of Directors.
A) Is you Business Plan / Executive Summary complete? Is it at least 15 pages, preferably more? (60-100 is a good size for a full Business Plan, 15-20 is more
suitable for an Executive Summary; always be thorough an complete!).
B) Did you include all financial projections, background information on your management team, cost estimates, descriptions of your product or project, time estimates for completion of construction, and any other relevant information for the Lender?
C) Did you provide official letters or documents to support your Security/Collateral? Evidence must prove that you have the Security or Collateral to guarantee the principal and the interest on the loan. If you have a standby letter/ line of credit from a Top 25 bank equal to or greater than your loan request, that is the best of all; be sure to include all documentation that the guaranteeing bank will give you.
For Project Finance only – Your Submission Form must be complete, and signed by a person with legal authority to do so.
A) Did you state the exact amount you need?
B) Did you include your business plan, Perfoma, Resume's of Principles, Marketing Plan, Exit Strategy, & Evidence of Funds, signed by the head of your company, which authorizes you to sign legally binding documents on behalf of your company?
Borrowers who understand the importance of good documentation and good collateral, will almost always obtain good financing and excellent interest rates, no matter how large the loan is, and no matter what the purpose. It is essential that the borrower "think from the Lender's point of view." If you were a Lender, you would want to be absolutely sure that you would be repaid your money, even in the extremely rare or worst case of a disaster, bankruptcy, etc. by the borrower. Give the Lender maximum confidence and assurance that he will not lose his money by lending to you. He should feel comfortable with the lending of his money.
IN PRACTIVE, ONLY ORIGINAL BOUND COPIES OF BUSINESS PLANS ARE ACCEPTED
(No facsimiles or email copies are usually accepted in the market place)
Selection of the lenders depends on what kind of project you may have, the amount of money you are requesting and the risk factor associated with your venture.
Loans on a Worldwide level are available for Projects:
Any Type of Security - Any Type of Government Issued Note or Bond - Any Bank Instrument - Any Currency Bills or Notes - Virtually Any Form of Paper that can be Bought, Sold, or Traded.
Lenders require that the collateral for the loan exists in the form of negotiable instruments that are rated and traded in the secondary markets and that can be easily liquidated in the United States or other major secondary markets in Europe and Asia.
Funding sources consist of Private lenders, trusts, banks, Private placements and Syndicated loans. We arrange all funds regardless of whether a project is involved. Funds borrowed must first be secured by acceptable collateral offered to the lender ( meaning principal amount and interest should be secured through the pledging of “A” rated Commercial Papers, Bonds, Notes, bank or Insurance guarantee, etc.
· Some Examples Are:
US Currency (any denomination)
Foreign Currency (any denomination)
US T-Bills
US Zero Coupons
Government Medium Term Notes (MTNs)
Government Bonds, Coupons, or Certificates
German Bearer Bonds
Stocks or Stock Blocks
Government Promissory Notes
Bank Promissory Notes
Corporate Bonds, MTNs, and Promissory Notes
Certificate of Deposit (CD)
American Depository Receipts (ADRs)
Bank Guarantee (BG)
Letters of Credit (SBLC, ILC, LC, Pay Order)
Private Debt - Mortgages, Loans, Liens and Encumbrances
· All instruments pledged must meet the following criteria to qualify as acceptable security.
a)must have been issued from a top 100 bank or institution,
b)must be transferable and negotiable,
c)must be bank-to-bank verifiable,
d)must be of non-criminal origin,
e)must be owned free and clear with no encumbrances,
f)must be fully legible with no alterations or editions,
g)actual instruments must be produced at closing and given to the escrow attorney effecting closing.
Submission Procedure
Submission Form - this is a simple form from the borrower, signed, dated, stating the amount of funds to be borrowed, Project Details the required interest rate and for the required period how many years.
Funding Procedure
Usually the instrument will be screened to determine acceptability. Your Guarantee will be checked by contacting the bank officers for full verification. Remember the necessity of bank-to-bank SWIFT/Key-Tested Telex secure verification.
Usually after a copy of the instrument was obtained and verified with the bank's officials, a proof of funds will be done on a bank-to-bank basis. At the right time, the guarantor bank will be provided with the full swift and KTT coordinates and there will be a mutual secure confirmation of the funds and the guarantee. After the signing of the contract to fund by the borrower, this process will be repeated when the funds are transferred to the borrower's account, and the guarantee is transferred to the lending bank's account. The a contract Offer to Fund will be issued if it's a legitimate instrument verifiable by Swift. If this is acceptable to the borrower, a bank-to-bank funding will take place, using the same secure method used to confirm the guarantee and the funds earlier.
International Construction Loans. This program is used in the financial market place for clients who are seeking to fund a construction project (domestic or foreign) and wish to immediately obtain funding without the arduous underwriting process dictated by conventional lending institutions.
Are you interested in a source of funds that offers the following:
· Minimal underwriting requirements,
· Interest rates of 2-3 points over the 6 month LIBOR during construction; 1-2 points over LIBOR for permanent financing.
· Funding for any feasible construction or rehab project in the world.
· No application fees of any kind.
· Funding amounts from $5,000,000 to $100,000,000.
· Funding in as little as four weeks from receipt of documentation..
· Funding for condominiums, income properties, residential developments, resorts, and much more!
Here are the requirements generally applicable:
· A complete project book providing a full description of the proposed project. If available, also forward a current feasibility study and appraisal.
· A Letter of Credit is required and may be supplied by our firm or by the client. If by the client then:
Client must produce a verifiable Standby Letter of Credit from a reputable domestic bank for 13% of the cost of construction or Financial Guarantee Bond from a A rated, or better insurer for 10% of the construction amount desired including closing fees of 4% to 6%. A bank will normally issue an “Intent to Issue” at no charge to client.
If asked to provide a Letter of Credit:
An average charge of 8% of the face amount of the Letter of Credit to arrange this instrument. This fee is payable within 3 days prior to issuance.
This program is very desirable for those wishing to limit the leverage on their assets and can be arranged within 10 days of initiating paperwork.
· No “Funds First” requests will be accepted.
· Usually no proposals from “Guaranty” companies or so-called “Credit Enhancement” entities wil be entertained.
· Developer will be required to supply Performance and Completion Bonds. Local architects may be contracted with for inspections for fund disbursements.
· For consideration of a clients’ request the following is required:
A. Assurance that the client can produce one of the instruments as indicated above. The simplest means to accomplish this is with the “Intent to Issue” bank letter or enlisting services to provide the Letter of Credit.
B. Completion of Non Disclosure-Non Circumvent and Fee Agreements to be forwarded to the client upon receipt of complete project information as indicated above.
Submitting brokers must have their own fee agreements stipulating payment to them from proceeds after the close of the transaction or in some other form mutually acceptable to the broker and client.
Upon acceptable receipt of the above items a Letter of Commitment will be issued subject to a Letter of Credit, or Financial Guarantee Bond. Upon execution of the Letter of Commitment and verification/approval of the guarantee instrument, funds will generally be available within thirty days.
Stand By Letters of Credit (SBLC’s) - Cash them in for real dollars.
Note: This also applies to Letter of Credit (LC); Irrevocable Letter of Credit (ILC); and Pay Orders
Value conversion depends on many factors, some fixed, some floating such as:
· Type of Letter of Credit varies and includes (SBLC, ILC, LC, Pay Order, etc.)
· It is Usually viewed as a SBLC is the Better Bank Instrument
· SBLCs are issued on a Bank-to-Bank Basis only
· The Issuing Bank Rating as well as location (branch) of Bank
· Who is issuing the instrument - individual, company, government, etc.
· Instrument Must Be in US Dollars only
· Bank Policy
· Market Conditions
· Client Anticipation of Return
· Place Transaction Occurs
What is done with ‘Cash’ after conversion - this is becoming a paramount issue with banks converting the instrument, the preferred and acceptable method is to deposit a portion of the redeemed funds with the honoring bank, usually not less than 20% for a period of not less than six (6) months.
Hints
· These types of Bank Instruments can be issued to individuals, corporations, trust, pension funds, endowments, non profit organizations, or to any payable entity.
· Individuals who hold such an instrument may have problems with 3rd party transactions or banks.
· LC, ILC, or SBLC are often times issued for the sale and purchase of tangible assets.
· It is often easier to raise a 'Credit Line' than convert the instrument to CASH!
· Fluctuating World Market Conditions set the pace and determine the trading value, if any.
· Usually most every instrument can be converted, however, some are just Not desirable Trading Instruments on the current World Market.
· Certain Required "Documentation' is needed for this type of transaction.
Assignment
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
An assignment occurs when one party to a contract (a right, claim, or interest) transfers (assigns) his or her rights under the agreement to a third person. The person who transfers the right is called the assignor; the person to whom the right is transferred is called the assignee. The other party to the contract against whom the right can be exercised is the obligor.
Generally, only contractual rights (not contractual duties) can be assigned. Contractual duties can be delegated if they do not require personal services or the personal attention of the obligor. To be enforceable, an assignment must constitute a contract, i.e., a statement indicating an intent to make the assignee the owner of the right, claim, or interest. The assignment can usually be made orally or in writing.
Special rules have been formulated by stock exchanges to govern the assignment of stock.
Available Fund(s)
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
This term has two meanings:
1. A fund held by a non-stick savings bank in cash or on deposit with another bank or trust company for the purpose of paying withdrawals in excess of current receipts, meeting current obligations, or awaiting a more favorable opportunity for investment. In New York State this fund is limited to 20% of deposits.
2. Total funds of a bank available at any time for conversion into earning assets or other investment are not only its deposits but its total capital funds and any borrowed money as well.
Bank Notes
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A bank’s own promise to pay to bearer upon demand, and intended to be used as money. Bank notes are often referred to as circulating notes or circulation. The current emission of note issue in the U.S. is now confined to the Federal Reserve banks, which issue FEDERAL RESERVE NOTES. Power to issue notes still exists in national banks, but no government bonds bearing the circulation privilege are issued or outstanding. So does the power to issue bank notes continue to exist in state banks, but federal 10% tax thereon in the Internal Revenue Code continues to bar issue as a matter of feasibility. Since March, 1935, funds have been on deposit with the Treasurer of the U.S. to cover retirement of all FEDERAL RESERVE BANK NOTES and, since August, 1935, to cover retirement of all outstanding NATIONAL BANK NOTES.
Certificates of Deposit
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)
A receipt for the deposit of funds in a bank. Certificates of deposit (CDs) are of several types:
1. Demand CDs. Demand CDs are non-interest bearing and payable on demand; they are used mainly as a guarantee of payment – for example, as lottery prizes.
2. Time CDs. Time CDs are interest bearing and may range in maturity from 30 days to several years; denominations vary from less than $1,000 (individual CDs) to more than $100,000 (institutional CDs); the very large denominations may be negotiable and, properly endorsed, may serve as security for loans. Zero-rate CDs are sometimes used in lieu of compensating balances because of their lower reserve requirements.
3. Variable-rate CDs. Variable-rate CDs were instituted in 1973; their interest rate is tied to the 90-day CD rate and is adjusted every 90 days.
4. Variable interest CDs. Variable interest plus CDs were discontinued in 1981; their interest rate was tied to the weekly auction of six-month Treasury bills, and they could be used as collateral for short-term loans.
Banks are required to keep reserves against demand and time CDs corresponding to the reserves for demand and time deposits, respectively.
Commercial Paper
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
All classes of short-term negotiable instruments (notes, bills, and acceptances) that arise out of commercial, as distinguished from speculative, investment, real estate, personal, or public transactions; short-term notes, bills of exchange, and acceptances arising out of industrial, agricultural, or commercial transactions, the essential qualities of which are short-term maturity (three to six months), automatic or self-liquidating nature, and non-speculativeness in origin and purpose of use.
ESCROW
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A written agreement, e.g., deed, bond, or other paper, entered into among three parties and deposited for safekeeping with the third party as custodian to be delivered by the latter only upon the performance or fulfillment of some condition. The custodian or depository is obliged to follow strictly the terms of the agreement respecting the other parties.
Encumbrance
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
The term has two meanings: (1) a claim or lien on real or personal property, such as a mortgage, which diminishes the owner’s equity in the property; (2) a reservation of part of a governmental appropriation that is recognized at the time a commitment is made. The purpose is to ensure that a period’s expenditures do not exceed appropriations.
Fee
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
This term has two meanings:
1. A commission; charge for services. This term now is rarely used in finance, being supplanted by the term COMMISSION. It is primary used in connection with court costs in referring to witnesses fees, jurors' fees, and lawyers' fees.
Financial Instruments: Recent Innovation
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
Wall Street has developed numerous innovative financial instruments in recent years. These new financial instruments are difficult to classify according to traditional categories: debt, equity, and hedging instruments. Frequently they are hybrid instruments. The following "Glossary of Selected Financial Instruments" has been published in the Journal of Accountancy, November 1989, using the following categories: Debt instruments; Asset-backed securities; equity instruments; hedging instruments.
Debt instruments
Asset-Backed Securities
Equity Instruments
Hedging Instruments
Financier
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
One skilled in FINANCE; particularly one engaged in promoting and underwriting.
Funding
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
The process of converting the floating indebtedness of a government or political subdivision thereof, or a business corporation, into long-term debt. Funding may be accomplished by converting a series of short-term note issues into long-term bonds when interest rates are low or, in corporate finance, by selling stock and paying off short-term debts with the proceeds. In this way stockholders virtually buy out the interest of the creditors. Funding by means of the sale of additional stock is usually undertaken when the equity market is favorable.
General Purpose Financial Statements
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
Financial statements that are expected to present fairly the economic facts of the operationing, investing, and financing activities of an entity for investors, creditors, and other users of the statements. = Gross Deposits
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
Aggregate deposits, without any exclusions or deductions. Included in gross deposits are all types of demand and time deposits, including deposits due to banks and U.S. government deposits.
High-Grade Investments
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
Investments of superior merit, i.e., of low financial risk (risk of nonpayment if obligations, and risk of lack of earnings and nonpayment of dividends if equities).
Most obligations of governmental units and such bonds of seasoned corporations as are protected by well-established and adequate earning power, in addition to being secured by underlying mortgages if secured obligations, belong to this class. In general, the securities of the Federal government, the states, and political subdivisions thereof, as well as the senior bonds of seasoned railroad, public utility, and industrial corporations, will be found assigned the highest investment rating, but variations in such quality will be found among the "municipals." In their respective groups, the strongest preferred and common stocks may be characterized as high-grade.
Highly-Leveraged Transaction
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A transaction in which credit is extended in connection with LBOs, mergers and acquisitions, or corporate restrucEagle Tradersg, and where the credit results in an organization that has a total debt/asset ratio exceeding 75%. FDIC recommends how bank examiners are to assess bank policy on portfolio analysis, distribution and participation in HLTs, internal credit reviews, equity investments, mezzazine financing, and loan-valuation reserves. The guidelines also outline approaches to evaluating concentrations of credit and individual highly-leveraged transaction credits. The guidelines are primarily aimed at bank financing of corporate leveraged buyouts, and are in part a response to political pressure related to the risks banks may assume when financing LBOs. FDIC examiners are encouraged to use the 75% figure as a benchmark and to make industry-specific determinations of the significance of debt/asset ratios.
To assess the bank's full exposure to an HLT borrower, the guidelines suggest that the examiner review all loans, extensions of credit, acquisition-related debt and equity securities, standby letters of credit, legally binding contractual commitments, and other financial guarantees. Under the guidelines, an examiner should analyze relevant bank policies, credit concentration, and individual credits.
Hypothecation
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
The deposit of securities or other COLLATERAL, e.g., notes, acceptances, bills of lading, warehouse receipts, etc., as a ;ledge for the payment of a loan. Securities must be in negotiable form before they are acceptable as collateral.
Insider
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A person who, because of his employment or business connections, has intimate knowledge of the financial affairs of a concern before such information is published and is available to the public. He is therefore in a peculiarly advantageous position for capitalizing on this information by speculating, i.e., making commitments in the securities of the concern in accordance with this knowledge, in advance of the public.
Instrument
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
Any kind of document in writing by which some right is conferred or contract is expressed. Practically all documents used in finance, e.g., check, draft, note, bond, coupon, stock certificate, bill of lading, trust deed, trust receipt, etc., are instruments.
Investment Banker
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel (We recommend this as work of authority and you can order it here)
A firm engaged in investment banking, i.e., financing the capital requirements of business through the investment markets as distinguished from seasonal or current requirements normally financed by means of bank or finance company credit.
Leverage
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
The effect of trading on the equity, i.e., use of senior capital in capitalization's, in the form of borrowed funds, bonds, or preferred stock, ranking ahead of the junior equity, the common stock. In addition to such capitalization leverage, there is operating leverage, provided by relatively fixed operating expenses relative to expanding or contracting sales or revenues. There is also leverage provided by invested assets (or investment companies and insurance companies) and earnings assets or deposits (for banks), relative to stockholders’ equity or book value.
Maturity
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
The terminating or due date of a note, time draft, acceptance, bill of exchange, bond etc; the date a time instrument of indebtedness becomes due and payable, e.g., a 60-day note become due and payable at the expiration of that period. A check or sight or demand instrument matures upon presentation for payment.
Note
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A promise to pay as distinguished from an order to pay, such as a draft or check. Formally defined, a note is a written promise of the maker to pay a certain sum of money to the person named as payee, on demand or at a fixed or determinable future date. The Board of Governors of the Federal Reserve System has defined a promissory note as “an unconditional promise, in writing, signed by the maker, to pay, in the United States , at a fixed or determinable future time, a sum certain in dollars to order or to bearer.”
Program Trading
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
Arbitrage between the market for stock index futures and the stock market itself. Arbitrage traders attempt to profit by buying in one market and selling in another.
Program traders try to buy a stock index futures contract, such as the S&P 500 stock index, when it is cheap relative to the prices of the underlying stocks, and sell it when it is high. If the price of the futures contract becomes overvalued, program traders sell the futures and buy the stocks.
Standby Letter of Credit
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel(We recommend this as work of authority and you can order it here)
A contractual arrangement guaranteeing financial or economic performance involving three parties – the “issuer” (bank), the “account party” (the bank customer), and the “beneficiary”. The bank guarantees that the account party will perform on a contract between the account party and the beneficiary. The effect is to substitute the bank’s liability for the account party’s liability. The account party compensates the bank for the risk. The standby letter of credit contract typically includes provisions that allow the bank to (1) require the account party to deposit funds to cover anticipated payments the bank must make under the arrangement, and (4) book any un-reimbursed balance as a loan at interest and on terms set by the bank.
Attached please find the terms:
• Worldwide Project Financing
• Funding from $5 Million USD to $300 Million USD
• Funding in 45 to 60 banking days with total requested documents
• Financing approvals within 72-96 hours after total requested documents has been provided by applicant
• Rates between 6.5% - 12.75% 1-30 year fix. Interest Only, NO PPP. Total fees and charges are never more than 6 % of total funding and are settled on a case by case basis during the process. Note: these terms could vary for better or worse
• No minimum credit requirements
• Borrower must provide a solid business plan and exit strategy
• 15-25 % Equity Contribution into the deal is required.
You must remember before submission: Usually when a project is accepted for financing, a professional-quality Business Plan/Executive Summary is required and an official Submission Form signed by a person who has been officially authorized by you’re your company's Board of Directors.
A) Is you Business Plan / Executive Summary complete? Is it at least 15 pages, preferably more? (60-100 is a good size for a full Business Plan, 15-20 is more suitable for an Executive Summary; always be thorough an complete!).
B) Did you include all financial projections, background information on your management team, cost estimates, descriptions of your product or project, time estimates for completion of construction, and any other relevant information for the Lender?
C) Did you provide official letters or documents to support your Security/Collateral? Evidence must prove that you have the Security or Collateral to guarantee the principal and the interest on the loan. If you have a standby letter/ line of credit from a Top 25 bank equal to or greater than your loan request, that is the best of all; be sure to include all documentation that the guaranteeing bank will give you.
For Project Finance only – Your Submission Form must be complete, and signed by a person with legal authority to do so.
A) Did you state the exact amount you need?
B) Did you include your business plan, Perfoma, Resume's of Principles, Marketing Plan, Exit Strategy, & Evidence of Funds, signed by the head of your company, which authorizes you to sign legally binding documents on behalf of your company?
Borrowers who understand the importance of good documentation and good collateral, will almost always obtain good financing and excellent interest rates, no matter how large the loan is, and no matter what the purpose. It is essential that the borrower "think from the Lender's point of view." If you were a Lender, you would want to be absolutely sure that you would be repaid your money, even in the extremely rare or worst case of a disaster, bankruptcy, etc. by the borrower. Give the Lender maximum confidence and assurance that he will not lose his money by lending to you. He should feel comfortable with the lending of his money.
IN PRACTIVE, ONLY ORIGINAL BOUND COPIES OF BUSINESS PLANS ARE ACCEPTED
(No facsimiles or email copies are usually accepted in the market place)
Selection of the lenders depends on what kind of project you may have, the amount of money you are requesting and the risk factor associated with your venture.
26 GE Structured Finance Group --
http://www.geengineleasing.com/finance.asp
27 The Bank of New York Mellon --
http://www.bankofny.com/CpTrust/prd_gsf.htm
28 Ernst & Young --
http://www.ey.com/global/content.nsf/India/DCRS_-_Structured_Finance
29 J.P. Morgan --
http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/equities/derivatives/products/efsf
30 Hunton & Williams – Attorney at Law --
http://www.hunton.com/practices/practice_detail.aspx?gr_H4ID=907
31 Standard Chartered Group – Wholesale banking --
http://wholesalebanking.standardchartered.com/en/capabilities/corporatefinance/Pages/structuredfinance.aspx
32 Export-Import Bank of the United States --
http://www.exim.gov/products/guarantee/proj_finance.cfm