Karimazondo Africa International (KAI) an International Private Development, Finance and Investment initiative created to be an economic and development vehicle for Africa linking the Diaspora Communities to impact and bring development to their countries of origin. The KAI intends to initially set up Offices in the United Kingdom, South Africa and Zimbabwe with possibilities of future global expansion in response to investment and development appetite determined by demands in the global environment. KAI will engage with Governments, Non- Governmental Organisations (NGOs), Private Partnership players, Small to medium businesses and Individuals to identify, assess and appraise proposed Development projects on the one hand and link these to potential Investors of varying degrees and proportion subject to agreed terms and conditions to take up investments and impact communities through providing sustainable community development projects.
DIASPORA BONDS (DBs) is a debt note that usually matures (is paid back) in 5–10 years, but the term may be less than one year or as long as 50 years. They can be issued on a fixed or floating coupon basis. Floating rate medium term notes can be as simple as paying the holder a coupon linked to the US$ or can be more complex structured notes linked, for example, to swap rates, treasuries, indices, etc. DBs are most commonly issued as senior, unsecured debt of investment grade credit rated entities which have fixed rates. DBs offer more flexibility to the issuer and investor both in terms of structure and documentation.
This brief account aims at helping you find out about some of the obscure, or unclear, aspects relating to the Private Placement Opportunity Programs (PPOP), also known as Private Placement Programs (PPP), or under other acronyms like Private Placement Investment Programs (PPIP), etc. There are lots of people who know something, but cannot grasp the whole picture.
Large Instruments Market
As a consequence of the previous statements, there is an enormous daily market of discounted bank instruments involving issuing banks and long chains of exit- buyers (Pension Funds, large financial Institutions, etc.) in an exclusive Private Placement arena. All such activities on the bank side are done as "off-balance sheet activities" and as such, the bank can benefit in many ways. Off-Balance Sheet Activities are contingent assets and liabilities, and as such the value depends upon the outcome upon which the claim is based, similar to that of an option.
All programs in the Private Placement arena involve trade with such discounted debt notes in one way or another. And to bypass the legal restrictions, this can only be done on a private level. This is the reason why this type of trading is so different from the "normal" trading, which is highly regulated. In other words, this business can be done and restricted on a private level only (the private Placement level) that falls down in a special regulation without the usual strict restrictions present on the securities market.
The normal trading known by the public is the "open market" (as the "spot market"), where discounted instruments are bought and sold with bids and offers like an auction. To participate here the traders must be in full control of the funds; otherwise, they cannot buy the instrument and sell them on. And there are no arbitrage buy-sell transactions on this market, because all participants can see the instruments and their price.
However, besides this "open market", there's a "closed, private market" where a restricted number of "master commitment holders" is the inner circle. These master commitment holders are Trust with huge amounts of money that enter contractual agreements with banks to buy a certain number of new issue (fresh-cut) instruments at a specific price during a specific period of time. Their job is to sell these instruments on, so they contract sub-commitment holders, who contract exit-buyers.
These "programs" are all based on arbitrage buy-sell transactions with pre-defined prices, and as such, the traders never need to be in control of the investor's funds. However, no program can start, unless there's enough money behind each buy-sell transaction. And it's here the investors are needed, because the involved banks and commitment holders are not allowed to trade with their own money, unless they have reserved enough funds on the market-- money that belongs to the investors which is never used and never at risk.
The real core of KAI trading and its safety is due to the fact that we arrange the buy-sell transaction as arbitrage, which means that the instrument will be bought and sold at the same time with a pre-defined price, and that a chain of buyers/sellers are contracted, including the exit-buyers who often are institutions, other banks, insurance companies, big companies, or other wealthy individuals. The issued instruments are never sold directly to the exit-buyer, but to a chain of up to 3-7, or even perhaps 50 investors. The involved banks cannot for obvious reason directly participate in this as in-between buyers and sellers, but they are still profiting from it indirectly, because they are lending out their money (with interest) to the trader, or to the investor as a line of credit. This is the Leverage. Furthermore, the banks profit from the commissions involved in each buy-sell transaction of debt bank instruments in the trading circle.
You can also realize now why in these Private Placement Programs, the investor funds are always safe without any trading risk, or whatever other risk, except for the normal bank system risk (a bank can still virtually go bankrupt.)