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Asset Exchange Contracts

Heritage Bond Trading

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Establishing Buyer & Seller Credentials procedure using a Secured Data Exchange or “VDR”, and Title Transfer and Asset Hand-Over Hand procedure using a Secured Depository Trust Company (“SDTC”).

Presented by:: The Amhurst Financial Group

© 2010 The Amhurst Financial Group


Introduction to Asset Exchange Contracts

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Heritage Bond Trading

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In order to obtain a better command of the Heritage Bond markets on a global basis and starting off with the feedback obtained from the players of the market with whom we have interacted initially, we have drafted the present document with two basic aims; first it is to adapt and to norm our participation in a market whose “savoir faire” is very particular, and the second is to offer to our Prospective Sellers the certainty that it is possible to amalgamate their interests with those of our Prospective Buyers, as well as the other wat around.

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The Amhurst Financial Group


In a pressed market, to whom does this Mechanism serves The Asset Exchange (Heritage Heritage Bond) Bond market, is a market marked by the distrust, where there is a model of businesses highly competed by the Sellers (the “Sellers Sellers”), that already can be fulfilled or be failed to fulfilled fulfill and a certain mass of Asset Demand Numbers (the “Buyers”). For reasons applicable ble to our positioning as Investment Bankers and looking forward for to be the difference, we have chosen to be the intermediators of choice when dealing in Asset Exchange venues. It is to those Buyers and Sellers marked by the comings and goings in this market, to whom we put to their consideration this mechanism. The Ideal Situation and the Current Situation in an Asset Exchange

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In an ideal environment, the Seller of an Asset knows and trust the Prospective Buyer, either because of its profile or are in the same industry; at any rate the potential Asset Exchange is not marked by distrust.

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Figure 1.- A One On One relationship

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In other words;

Figure 2.- An Ideal Value Model


However, in the particular arena of the Heritage Bonds, however, distrust, skepticism and vulgarization of data, offers and even vulgarizing the players seem to be the current norm; the reason being is that in an effort to maximi maximize ze the possibility of a sale, in an environment where most of the players understand the fungibility of the Heritage Bonds as an asset that could be an avenue of financial enhancement, little do they know about their origins, features and limitations. Notwithstanding Notwithstanding the former, the sole knowledge of their fungibility, has made the Heritage Bonds subject to a naked speculation by uncontrolled brokers, to the point of vulgarization and perversity. Also, very important to know, is that the prospective amounts of commissions to be paid create inflation like multiplication of brokers and documents.

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Legit Bond Owners provide a mandate to market their assets to an individual, basically on a personal trust basis; the Mandates do circulate the offer to as many brokers as possible in order to secure a sale, creating a waterfall effect in the market.

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Figures 2 & 3 Vulgarization in opposite directions

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Over time, some brokers have developed a capacity to flip the sale process, so, instead of being the intermediaries of the sale, they attempt to become buyers and resellers by flipping the process.

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The vice versa happens in the Buyer side of the equation;


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Ultimately, a rarefied atmosphere prevails in the market, market to the extent of creating a Credibility Problem;

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Figure 4.- The Credibility Problem

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This Credibility Problem creates Inconsistent Silos of Information, where the perception that everybody lies is the norm. norm

Figure 5.5. An Asset Exchange becomes a jigsaw puzzle Note.- The name of Structuring Agent and Intermediator is used indistinctly to designate the professional individuals or organizations that work in Asset Exchange venues.


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If an Asset Exchange becomes a jigsaw puzzle, then, who who wishes what;

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Figure 6.6. The Need of Secured Data Exchanges

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What do we propose?

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A mechanism that allows to the parties’ satisfaction as far as the establishment of their credentials in the initial stages of the process, and later with regards to the contractual content. Where the Buyer transfers to the Secured Data Exchange (herein after, “VDR”) the financial proof to carry on with the Asset Exchang Exchange, e, and the Seller transfers legit Asset Information, in a manner, that there is no uncontrolled flow of information. Where the Intermediator on behalf of the Seller and the Buyer verifies the information the parties give, with absolute independence and objectivity. obj Leaving the parties to the venue, in freedom to grant their conformity or unconformity with the received information according to their instructions. A control mechanism to guarantee to the Seller payment for a completed and perfected transaction, transaction, and at the same time that guarantees to the Buyer the opportune delivery of the Assets per the contractual content.

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A Model set out to mitigate the perception of which the Asset Exchange is not governed by a Win-Lose Lose equation for the parties. part


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What do we propose? (continued)

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Figure 7.- Unite the Silos of Information

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In sum;

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Every time we walk into an Asset Exchange Project, this is what we see: four official and distinct groups of people who all share a relationship with an Intermediary, operating independently almost in the vacuum, plus a number of uncontrolled brokers.

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There are no standards for Asset Exchange (Heritage Bonds) acquisitions, no formal procedures established other than perhaps a simple “are the agreements in place?” checkbox. This checkbox gives everyone a false sense of security because while an agreement may exist, it most likely favors the one party over the other. The people believe that they have protected themselves by becoming party to an agreement but it is simply not the case.

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One of the biggest advantages of using the proposed approach is that we can help the parties to an Asset Exchange Project is to create standard procedures that everyone follows. We get everyone on the same page with a Secured Data Exchange or “VDR” and the use of a Secured Depository Trust Company (“SDTC”) that protects the parties to the project and significantly reduces risk.


Establishment Buyer-Seller Credentials procedure using a “VDR”, and Title Transfer and Bond Hand-over procedure using a Secured Depository Trust Company (“SDTC”).

1. Prior to Closing.- After the signing of the Non-Disclosure Non-Circumvention Agreement and the Master Fee Protection Agreement, and through the arrangement by the Intermediary Group, a representative of the Intermediary Group will meet with Seller Representative in the Original bondholder’s legal depository for a visual inspection, once completed the visual inspection and Proof Of Product (POP) video is taken, this will be the standard procedure whenever possible.

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For the cases in which a visual inspection and the POP video is not readily possible, Intermediary shall ask in writing through a Transmittal of Request Memorandum to the representative of the Buyer the issuance of a Documentary Bond Inventory of Serial Numbers/Safe Keeping Receipt Request (Serial Number/SKR Request Memorandum) to the Original Bondholder.

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The document containing the Serial Numbers Inventory or SKR shall be up-loaded to a Secure Document Exchange Repository (“Data Room”), where only a previously screened prospective Buyer may see it in a limited fashion (no printing shall be allowed and the documents will be view protected to avoid unauthorized copying), for a period of 24hrs; either party may freely request to the Intermediary a viewing extension period, said extension period request, shall be discussed with counterparty of the requestor. Buyer/Seller viewing permissions shall be granted upon Buyer/Seller mutual satisfaction.

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The Serial Number/SKR Request Memorandum, shall indicate to the Original Bondholder(s) and his Representative(s) the preliminary commencement of the Bond Expertizing Process, and in consideration of such envoy by the Original Bondholder, the Buyer will up-load to the Data Room the documents that will show financial strength and capabilities to pay for the bonds, to such extent, the Buyer Representative, will provide a Letter Of Intent, with banking coordinates and full authorization to the Seller to carry out a soft probe on a bank to bank basis per this Instrument and the Purchase-Sale Agreement . (*) Once that the parties have proven their capabilities to one another, both shall proceed immediately to arrange for a Safe Depository Facility where the transaction is to be processed, a date(s) in which the Purchase-Sale Agreement, the authentication of the bonds and the completion of the hand-over process to the Buyer, and its subsequent pay-off(s) to the Seller is/are to be carried out.


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Figure 8.- a Flawless start

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(*) In the case that there is no Buyer/Seller comfort and one or all of the parties to this venue wish to cancel the procedure, the Intermediary will remove by way of deletion of the documents, remove the parties from the Authorized Viewers/Up-loaders Viewers/Up and User Permissions Module, upon completing this process the Intermediary will notify the parties in writing the cancelation of the venue, the removal by way of deletion of the documents, removal of the parties from the Authorized Viewers/Up-loaders Viewers/Up and User Permissions missions Module, providing actual system screenshots of the Data Room empty of any transactional documentation.

Figure 9.- A flawed start-end of venue


Establishing Buyer-Seller Seller Credentials procedure using a “VDR” and Virtual Data Room Screenshots

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1. The parties to the Asset Exchange Venue sign the initial customary documents to start the Establishment of Credentials and the Pre Pre-Closing verifications.

2. The document containing the Attestations of Legal Ownership, Serial Numbers

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Inventory or SKR shall be up-loaded up loaded to a Secure Document Exchange Repository (“Data Room”), where only a previously screened prospective Buyer may see it in a limited fashion (no printing shall be allowed and the documents will be view protected to avoid unauthorized copying), c for a period of 24hrs. s. The Buyer will up up-load to the Data Room the documents that will show financial strength and capabilities to pay for the bonds, to such extent, the Buyer Representative, will provide a Letter Of Intent, with banking coordinates and full authorization to the Seller to carry out a soft probe on a bank to bank basis per the Purchase-Sale Purchase Agreement


3. After granting viewing permissions the Intermediary Emails each of the parties the link

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to access the VDR, the link to access the VDR is received by the Buyer and the Seller to view each other corresponding information for a period of 24hrs; either party may freely request to the Intermediary a viewing extension period, said extension period request, shall be discussed with the counterparty of the requestor. Buyer/Seller viewing permissions shall be granted upon Buyer/Seller mutual satisfaction.

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4. The parties to the Asset Exchange clearing the VDR’s Security Modules, get to see the expected documentation


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5. Until the e actual commencement of the Closing and Hand-Over Hand Over Process, the Intermediator will monitor all Buyer/Seller document activity, should information be leaked willingly or unwillingly the VDR System will issue warnings of unsuitable as well as normal activities relating any of the Seller’s documentation, since any protected document is able to create a watermark with last recipient or sender’s email, thus enabling the VDR and the Intermediator to know who has what, and whether is normal or abnormal activity ivity along with the watermark feature, the VDR System also logs the Internet Protocol Address (I.P. Address) of any user whether this a legit or a non non-legit user, this provides the Intermediary with information to issue a warning to the Seller to take appropriate ropriate action on his/her side.

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6. The VDR System in an identical manner as above depicted, provides the Intermediary with information to issue a warning to the Buyer to take appropriate action on his/her side.


7. Once that the parties have proven their capabilities to one another, both shall proceed immediately to arrange for a Safe Depository Facility where the transaction is to be processed, a date(s) in which the Purchase-Sale Agreement, the authentication of the bonds and the completion of the hand-over process to the Buyer, and its subsequent pay-off(s) to the Seller is/are to be carried out (see the Title Transfer and Bond Handover procedure using a Secured Depository Trust Company (“SDTC”) above for further reference .

2. Closing and Hand-over Procedure

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During The Closing. - the parties to Purchase-Sale Agreement do concur that the pay-off(s) stipulated in the Agreement will become due at the moment of transmission of the property title of the goods under the Master Fee Protection Agreement and the Purchase-Sale Agreement, this is the moment at which the specified number Assets/Heritage Bonds, according to the Purchase-Sale Agreement, are in possession of the Buyer per the Purchase-Sale Agreement, under said Agreement the hand-over of the title will be executed, when the pay-off(s) is(are) verified by the corresponding banking slip of transference carried out by means of interbank mechanisms approved by the law and derivative of the use of the contractual agreement type “LOI” the international that allows the direct exchange of bonds and pay-off(s).

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Hand-over Scheduling. -

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The following postulates are indicated herein after as a General Procedure and they are included in the Purchase-Sale Agreement.

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1. -The Purchase-Sale Agreement establishes the indicated amount to operate the Title Transmission and Bond Hand-over:

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2. - The Buyer accepts to examine the bonds in the Seller/Buyer appointed legal repository and in said premises execute the work of “verification and expert survey” of the bonds, finally to credit their authenticity as “governing bonds”, the parties accept specifically that, it is the obligation of the Buyer to obtain the registry and the recognition of these bonds before the authorities of the issuing country, which shall make them able to be collateralized for financial instruments validated for use in international operations. Also the Buyer resigns specifically to the right to exert legal action against the representatives, intermediaries, and/or liaisons whose names are written down in the Purchase-Sale Agreement and/or the present instrument in case of a failed certification and registry of bonds process, once the title is transmitted. 3. - Also the Buyer according to his representative, accepts to cover the expenses of the Asset Exchange per bond on the contracted package, contributing the 100% the cost of the Asset Exchanges, prior to the beginning of the Asset Exchange. 4. – The contracted Asset Exchange shall be executed by the company secured by the representatives of both parts and that to properly contracted and credited by the Buyer, who will cover all the expenses inherent to the endorsement of “an existence verification”, an expert survey of authentication and an integral report contained in a notarial faith of facts that he makes official the content of these packages properly sealed and signed.


5. - The works of the described Asset Exchange,, will be executed in a period of time scheduled according to volumes of bonds subdivided in packages and the applications to the receiving accounts will be made after credited bonds immediately, without exceeding the granted term of specified hours for the e entire process, considering that in the pay-off(s) pay off(s) process it has been taken into account the hour difference between Seller Home Location and the Buyer Home Location or a Third Home Location from where the funds will be transferred. 6. Both parts agree thatt within this process the Buyer has transported his personnel to the place protected being this a selected site and perfectly controlled in where they are to develop to the works of laboratory and recognition there, for later and by instructions of the Buyer Buy ’s representative and/or Buyer directly, the bonds credited to the Buyer, are to be sent or protected in sealed packages to be kept in the same legal repository and/or to be sent to where the Buyer indicates it, by the means that he selects.

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7. Both the Seller as well as the Buyer will be able to make formal appearance in the enclosure of Asset Exchange with two assigned members and totally identified being these previously selected and properly credited, to allow them to physically be in the presence of the works during a daily term that will not exceed the specified hours, with the sole limitation that if they leave during the process of work for the bond packages, they could not be readmitted into the premises during the works, thus, both parts will have have their respective representatives in the place and during the act and at all times.

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8. - Any suggestion, propose change or request that does not alter the process for the Asset Exchanges, shall be taken into account and approved previously by both parties and the people in charge contracted for these works.

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9. – both parties agree to setup an option for extending the Purchase-Sale Sale Agreement based on the availability and the desire to exchange additional amounts of bonds, which will be governed by the Purchase-Sale Sale Agreement, Agreement, conserving same conditions and compensations.


Asset Exchange through the SDTC

Data

Flow

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Contract

Management

(Heritage

Bonds)

What is trading? Trading is an agreement between two parties buying and selling or exchanging assets from physical to financial assets (securities). Each trade can be considered a contractual agreement to exchange a certain amount of securities for a certain price. Settlement across the Asset Exchange (Heritage Bonds) market; too complicated and most likely to be costly.

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Trading, clearing and settling of assets require infrastructures (e.g. IT systems) that move both assets and money, as well as the related data, rapidly and securely between buyers and sellers.

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Trading, clearing and settling across the market requires the same conditions across country borders. However, nowadays transactions on the global level are still more complicated and costly than those within the same country.

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Settlement across un-standardized market, and cross-border settlement is significantly more expensive than within the same country. Lack of proper Standards leads to High costs and other barriers hinder growth in the market.

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SDE (VDR)/SDTC is an initiative of the Amhurst Financial Group; it is an IT platform that will help make settlements even simpler and more cost-efficient than what happens today.

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What happens after trading?

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After the two parties have agreed on the exchange of assets, the clearing and settlement process starts, also referred to as "post-trading".

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Clearing: the trading agreement creates a debit position with the buyer and a credit position with the seller. In general, "clearing" refers to the calculation of mutual obligations

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Settlement is the completion of a trade transaction: the seller transfers the securities to the buyer and the buyer transfers money to the seller. Settlement may be "provisional" or "final". When it is provisional, one of the parties retains the right by agreement to rescind the transfer of assets. When settlement is final, the transfer of assets is unconditional and irrevocable. Single shared IT platform for Buyer-Seller settlement SDE (VDR)/SDTC is an important step towards removing some of the barriers mentioned before. SDE (VDR)/SDTC will be a single IT settlement platform for all player to use. This single platform will form the common technical basis for security settlement across the market. The common basis will significantly reduce the existing barriers and reduce the vulgarization regarding Asset Exchange projects. SDE (VDR)/SDTC is neutral, and as such, will not put specific parties, market infrastructures or groups in any more favourable or disadvantageous positions. Several barriers, including own Buyer-Seller procedures will not be affected by SDE (VDR)/SDTC. However, SDE (VDR)/SDTC usage will be a catalyst for harmonisation and may lead to harmonisation initiatives reaching beyond the pure Asset Exchange Process.


In the following pages are some of the variants of Asset/Payment Data Flow and Contract Contrac Management to be used during the life of an Asset Exchange contract.

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Daily aily Phase of an Asset Exchange, without conformity problems. –

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Figure 10.- A Smooth Process

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(Daily) Phase of an Asset Exchange, with conformity problems. –

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Sometimes the Assets are extremely old and subject to human handling and of course manipulation, this leaves some Assets out of specification and thus unconforming for contractual content. In this case the only possible cure, is to substitue, the Non-conforming Non Asset, t, with a new one, and make it subject a new verification.

Figure 11 Handling of Non-Conforming Non Documents


(Daily) Phase of an Asset Exchange, with successful cure of conformity problems.-

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Once the Non-conforming documents have been detected in the daily content of the operations of the Asset Exchange contract, cure operations are carried out in an iterative manner for the length of a Phase/Period.

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Figure 12 Handling and pay-off of cured Documents

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(Daily) Phase of an Asset Exchange Contract with an unsuccessful cure of conformity problems. –

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During the operations each Phase/Period of the contract of Asset Exchange, the Intermediator can detect terminal Non-conformities in the contractual operations, in which case, the Intermediator after the iterative process of cure by substituting the Nonconforming Documents, and successive verification attempts, and the conclusion is that the Seller has no more Conforming Documents, the Intermediator calls for the cancellation of the Asset Exchange Contract, Funding is Withheld/Returned to Buyer and all Seller Documentation is returned to Seller, and the parties to the venue are free to seek Arbitration or Injunctive Relief at the designated domicile courts of choice (see below).


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Figure 13 Handling of Non-Conforming Documents

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(**) Upon completion of the Sale and Hand-over procedure, the Intermediary will remove by way of deletion of the documents, remove the parties from the Authorized Viewers/Up-loaders and User Permissions Module, upon completing this process the Intermediary will notify the parties in writing the successful closure of the venue, the removal by way of deletion of the documents, removal of the parties from the Authorized Viewers/Up-loaders and User Permissions Module, providing actual system screenshots of the Data Room empty of any transactional documentation.


About the Amhurst Financial Group The Amhurst Financial Group has its corporate head office in Surrey, United Kingdom. The Group is comprised of The Amhurst Bank Ltd., The Latchmere Bank Ltd., Barclays Structured Finance Ltd. and Soundman Limited Corporation.

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The Amhurst Bank Ltd. is our holding company it is the consignor of the capital markets bank undertaking of our group; as a dealer dealer-arranger for various innovative financing structures and financing vehicles of our own design as well as from our strategic alliances, along with other more conventional financing schemes. It was incepted to be a placement agent for both public and private issues on the global capital markets.

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Its principal subsidiary is Barclays Structured Finance Ltd., with head offices in London. This company provides services of financial consultancy, the structuring and design of the various financing/credit products that are to be used in in the financing for the projects in charge of the company and/or of the group.

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The Latchmere Bank Ltd. has been organized to provide services of Private Banking, Custodial Services, Wealth Management, Asset Preservation, safekeeping, and General Business Services for high net worth individuals and corporations, with whole range of private banking business services based in the Universal Banking Business Model. It has its see in the County of Surrey, United Kingdom, and it is in process of opening of an office off of representa representation in the Commonwealth of Dominica and before the Bailiwick of the Island of Guernsey.

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The technological arm of the group is Soundman Limited Corporation, a company constituted to provide services of Alternative Risk Transfer (ART), financial, political and project risk mitigation strategies, technological development of financial systems to source funding, financial risk mitigation, business planning, it is capable of providing other technical techn developments such as project management systems, as well as home and field services for engineering, procurement, construction testing, startup and commissioning of capital assets. The firm can render project proje management services; it can be a General Contractor for in-house in uses and/or for third parties

Contact us


Contact us Latin America Representation Office C/O

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Barclays Structured Finance Ltd. Fuente de Pirámides No. 1, Piso 6, Despacho 604 Lomas de Tecamachalco Del. Miguel Hidalgo, Mexico D.F., 53950, Comn. + (5255) 52939499 head.office@barclayshouse.info


Assest Exchange Procedures