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.
Introduction
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.
Private Placement
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 Safety
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.)
