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Financial Policies Dich Vu Tai Chanh Chuyen Nghiep
Project & Commodity Financing PROFESSIONAL FINANCIAL SERVICES
Procedures & Documents Services Financiers Professionnels
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Professional Advice & Introduction: Commodity Financing. Project Funding. Self-Liquidating Loans. Assets Management. High Yield Investment Programs. Discounting Documents PN,L/C,SL/C,BG. Banking and Insurance Documents. Secured Financial Procedures. Doc.Texts. Transactions of Precious Stones, Metals. Asset Management
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PROJECT FUNDING
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Development of an Example of Project Funding
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| | | SUSTAINED LOAN PROGRAMS:
Funding to Projects by Private Placement
by Prof.Dr.NGUYEN PHUC LIEN, Economist
Director of WIM-IMPACT SA. & of PAN ASIA CORPORATION (Switzerland)
Geneva 2001
During years of works in Project Financing, we observed that Prime Banks prefer to provide Funds to Great Companies in rich Countries and that when a young and poor Entrepreneurs go to Banks, requesting funds to their excellent Projects, the Banks ask them if they can provide a Prime Bank Guarantee.
How a poor young man can provide such a Prime Bank Guarantee ? There will be no loan to him for his excellent Project ! How poor Countries can develop their economic Projects when the Bank Guarantees issued by their Central Banks are not accepted or difficultly acceptable with very low price ?
Our main efforts were in search of Methods sustaining loans to the above poor Countries and to the above young and poor Entrepreneurs. We were thinking of the combination of financial possibilities such as the Leasing Bank Guarantees, the motivation of Assets and the Private Placement in High Yield Investment Programs.
The Loan is not a gift. We don’t trust in easy money. We follow the conventional principles of Loans. But our main efforts are to find out current financial techniques which can be realized with the limited capabilities of poor Countries and of poor and young Entrepreneurs in order to follow the conventional principles of Loans required by Lenders.
During the past eight months, we have intensively worked with two Groups in USA, who, with their long and large experiences in this matter, are actually in connection with an important Offshore Financial Source. And during the entire recent ten days, from 22 to 31 July 2001, we worked directly in the Office of this important Offshore Financial Source for details of its financial techniques. This Financial Source is handling the Arab and American Offshore Funds. Its Branch Offices are in Free Tax Areas such as Dubai, Nassau (Bahamas). Its Paying Bank is in London.
Below are the concrete results obtained from our direct works with this Financial Source.
A. CONTENTS OF FUNDING PROGRAM
This Funding Program can be used worldwide to raise funds from USD.1 million minimum to USD.500 millions for all types of Projects including business start-ups, business acquisition and expansion, real estate acquisition and development. Preferences are for productive Projects, mostly in Agriculture, Foodstuff Industries and Public Health.
Funds are available to individuals or corporations in any acceptable Countries. This will be 100% Project Funding. The eligibility requirements are the same as with any other conventional Lenders:
4. The Project Owner has to show that he will have the Ability to repay the Loan and to pay the Interest ;
5. The 100% Loan is to be guaranteed by acceptable Bank Instruments;
6. The Ability to pay the Interest will be based on the potential Income of the Project.
(We will explain how to utilize the current financial techniques to satisfy these requirements in order to sustain Loans to poor Countries and to poor and young Entrepreneurs)
The Funding Program suggests Three OPTIONS:
1. Option ONE
This Option is a straight loan for 1 to 10 years. This is the real conventional loan: the Borrower is responsible to pay back the principal loan amount and the interests during the term of the loan. He has to provide acceptable Bank Instruments to guarantee the loan amount and the Business Plan with detailed Feasibility Studies showing potential income.
2. Option TWO
This Option respects the same above principles of loan. But instead of providing the Bank Instruments to guarantee the loan amount, the Borrower has to double the loan amount. One half of this doubled loan amount will be utilized to buy the MTN (Mid Term Bank Debentures) to repay the principal amount of loan at Maturity; and one half of the doubled loan amount will be for the realization of Project.
The entire doubled loan will be confirmed by a Bank Loan Commitment issued by a Standard and Poor’s International Commercial Bank rated ‘’A’’ or better. This Bank Loan Commitment is arranged by the above Financial Source. This Financial Source arranges equally the purchase of MTN by using one half of your doubled loan.
For the Interest, you are responsible to pay it. You have to provide the Business Plan with detailed Feasibility Studies showing potential profits to assure the ability to pay the Interest.
Example: For this Option TWO, the Project needs USD.10’000’000. You have to request the double of the required amount, i.e. the total amount of USD.20’000’000. The Financial Source arranges the Issuance of the Bank Loan Commitment issued by a Standard and Poor’s International Commercial Bank rated ‘’A’’ or better, for the entire doubled amount USD.20’000’000. Based on this Bank Loan Commitment, the final Lender gives the funding of USD.20’000’000. The Financial Source will utilize one half of this doubled amount, i.e. USD.10’000’000 to purchase the MTN (Mid Term Bank Debentures) to assure the repayment of the real loan USD.10’000’000 at Maturity. The other one half USD.10’000’000 will be utilized by you for the project realization. Certainly, you have to pay yourself the interest computed on this amount USD.10’000’000. The ability to pay this interest will be assured by the potential income from your Project.
In fact, with the Option TWO, you are responsible to pay only the Interest. You can assure the payment by different ways:
- By showing your great potential income of the Project;
- By the availability of your own Assets to be assigned to the Lender’s side
- By confirmation with responsibility from a Guarantor
- By any other possibilities from you to convince the Lender’s side about your ability to pay the interest.
In this Option, the technique Leasing Bank Instruments is utilized to sustain loans to poor Countries or to poor and young Entrepreneurs.
We call this Option TWO as SEMI SELFLIQUIDATING LOAN
3. Option THREE
This Option is the same as the Option TWO: (i) Doubled loan amount requested by you; (ii) Issuance of Bank Loan Commitment for the doubled loan amount, arranged by our Financial Source; (iii) Using one half of the doubled loan amount to purchase the MTN to assure the repayment of principal loan at Maturity, arranged by our Financial Source; (iv) Liberating one half of the doubled loan amount to the Project realization; (v) Proofs of the Borrower’s Ability to pay Interest.
The unique difference between the Option TWO and this Option THREE concerns the way to assure the ability to pay the Interest.
We think of the possibility of the private placement in High Yield Investment Program. Indeed, the Project has schedule of realizations and the total of loan amount cannot be spent at one time. We have the availability of cash for a period of time. We utilize it for the investment in High Yield Program. This investment will provide profits to assure the ability to pay interest to Lender’s side.
When the Trader/Trading Bank engage the private placement for HYIP, we ask them to provide you a Commitment covering the payment of interest. The Trading Bank can issue a Bank Instrument for this purpose. Then you utilize this Bank Instrument as your proof of ability to pay interest.
Note on HYIP: the minimum unit to enter into HYIP is normally USD.10’000’000. It is not often evident to have real Trader Groups. We were working in this matter and we can have possibilities to introduce you to Trader Groups. The HYIP provides you not only with enough profits to cover the payment of interest, but with much more profits for the realization of Project.
Briefly, with this Option THREE, the principal and interest payments are fully paid off with arrangements from other Entities, and not by yourself. We call this Option as the FULL SELFLIQUIDATING LOAN.
In all the above Options, the interest rate is computed adjustable 3 Months LIBOR plus Risk Margin. The Risk Margins depend on the location of the Project.
B. FEES AND COMMISSIONS
If your Project is accepted and concluded for funding, you must be able to pay the following Fees and Commissions:
1. RETAINER FEE
This retainer fee is to cover all the services provided by the Program Coordinator and by his Associates. These services contain: contact services between you and Financial Source, preparation of papeworks for you, preliminary examination and correction of your Project Summary, correspondence fees, telephone, fax, courriers, assistance to negociations with the Financial Source…There will be a RETAINER FEE AGREEMENT signed between you and the Program Coordinator. This Agreement will be signed only after the acceptance of Funding to your Project. The Program Coordinator and his Associates will share this Retainer Fee for their mutual services provided to you.
The fixed amount of Retainer Fee is USD.2’500.- paid directly to the Account which will be communicated to you by the Program Coordinator or by his Associates.
2. BANK LOAN COMMITMENT FEE
As previously explained, the Financial Source arranges the Bank Loan Commitment issued by a Standard and Poor’s International Commercial Bank rated ‘’A’’ or better. Certainly, the issuing Bank requests bank fee.
This bank fee contains fixed basis fee plus additional fee. The computation is as follows:
=> The fixed basis fee is USD.80’000
It means that you pay the basis fee USD.80’000 even when you request only a loan of USD.1’000’000. You pay the same amount if you request USD.200’000’000.-
=> The additional fee varies according to amounts of loan:
à From USD.1’000’000 to USD.100’000’000:
Additional fee is USD.1’000 for each additional million
à Over USD.100’000’000:
Additional fee is USD.500 for each additional million.
Example: your request for loan USD.30’000’000.
Basis Fee:……………………………………….…………USD. 80’000.-
Additional Fee: USD.1’000 x 30 millions = ………….…USD. 30’000.-
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Total Bank Loan Commitment Fee:…………………….USD.110’000.-
The payment of the Bank Loan Commitment Fee will be realized as follows:
- Signature of the Loan Agreement with the Financial Source that you will meet in Dubai, Nassau or London. In this Loan Agreement, the Bank Loan Commitment Fee is clearly defined and engaged. This Loan Agreement includes the Exhibit ‘’A’’ showing clearly the contents of the Bank Loan Commitment which will be issued.
- Two Signatories of the above Loan Agreement mutually engage an official Neutral Stakeholder Law Company who reserves a Stakeholder Account in a Prime Bank. This Neutral Stakeholder Law Company has the responsibility to keep in security this Bank Loan Commitment Fee in Stakeholder Account.
- After the signature of the Loan Agreement and after the engagement of the Neutral Stakeholder Law Company, you wiretransfer the amount of Bank Loan Commitment Fee to this Stakeholder Account.
- The Financial Source begins to arrange the issuance of the Bank Loan Commitment issued by a Standard and Poor’s International Commercial Bank rated ‘’A’’ or better. This Bank Loan Commitment respects strictly the contents of the Exhibit ‘’A’’ included in the Loan Agreement that has been signed between the Financial Source and the Borrower.
- After the issuance of this Bank Loan Commitment, the Beneficiary (Borrower) will be informed by the Neutral Stakeholder Law Company or by the Financial Source that the Bank Loan Commitment is already issued and ready for viewing in Duby (London, or Bahamas)
- The Beneficiary (Borrower) has to travel to Duby (London, or Bahamas) to examine this Bank Loan Commitment if it is correct according to the Exhibit ‘’A’’ already accepted by two Signatories in the Loan Agreement.
- After this viewing the Bank Loan Commitment and after its acceptance, the Beneficiary (Borrower) will give order to the Neutral Stakeholder Law Company to pay the Bank Loan Commitment Fee to the issuing Bank. If the contents of this Bank Loan Commitment are not correctly issued, the Beneficiary (Borrower) has the right to claim the Neutral Stakeholder Law Company to return this Bank Loan Commitment Fee back to the Borrower from the Stakeholder Account.
3. NEUTRAL STAKEHOLDER FEE
The Stakeholder Fee will be paid to the Neutral Stakeholder Law Company for its service of keeping in security the Bank Loan Commitment Fee and for its payment of this fee or for the returning it to the Borrower. We have worked on the place with one of Neutral Stakeholder Law Companies. The Stakeholder Fee is 2% (two percents) computed on the amount of the Bank Loan Commitment Fee. For example, if the Bank Loan Commitment Fee is USD.110’000, we have to pay USD.2’200 for Neutral Stakeholder Fee. This Stakeholder Fee will be wiretransferred at the same time with the Bank Loan Commitment Fee.
4. LOAN COMMISSIONS
The Loan Commissions are to cover all Intermediaries. There are Agreements between Intermediaries concerning the Commission Splits. The Loan Commissions will be paid only at the closing, i.e. the payment of loan.
The Loan Commissions depend on the amounts of loan as follows:
From USD. 1’000’000 to USD.10’000’000, commission:……………………..3%
From USD.11’000’000 to USD.25’000’000, commission:……………………..2.5%
From USD.26’000’000 to USD.50’000’000, commission:……………………..2%
From USD.51’000’000 to USD.75’000’000, commission:……………………..1.5%
From USD.76’000’000 and up, commission:……………………..1%
C. PROEDURES OF REALIZATION
The realization of the transaction follows the steps:
1. STEP 1:
Borrower communicates his intent to request for loan to the Associates of the Program Coordinator. The Associates work with the Borrower on the excistence of Project and on the capability of the Borrower to pay the Bank Loan Commitment Fee (Please see Item B.2 on the computation of this Bank Fee)
2. STEP 2:
Program Coordinator will send to the Borrower through his Associates the necessary Documents to be signed:
- LETTER OF INTENT
- Information on the Project Summary
- Non-Circumvention and Non-Diclosure Agreement
- Specimens of Authorization: Limited Power of Attorney, Full Power of Attorney, or Corporate Resolution.
3. STEP 3:
Borrower sends through our Associates the duly signed Documents back to the Program Coordinator:
- LETTER OF INTENT
- Project Summary
- Non-Circumvention and Non-Disclosure Agreement
- Bank Proof of Funds to cover the Bank Loan Commitment Fee
4. STEP 4:
The Program Coordinator transmits the Dossier of Request for Loan to the Financial Source. If the Request for Loan is accepted, the Program Coordinator will send to the Borrower through his Associates the following documents:
- Retainer Agreement to be signed (Please see Item B.1 on Retainer Fee)
- Communication of the Account Number for the transfer of the Retainer Fee
5. STEP 5:
After reception of the transfer of Retainer Fee from the Borrower, the Program Coordinator will work with the Financial Source for the preparations of the Signature of the Loan Agreement. The Borrower has to send to the Program Coordinator a Copy of Business Plan. Based on this Business Plan, the Program Coordinator will previously explain to the Financial Source the ability of the Borrower to pay interest. The Borrower can send to the Program Coordinator through his Associates all Proofs showing his ability to pay the interest. At this Step, the Program Coordinator has to contact Trader Groups for the private placement.
6. STEP 6:
When all the preparations in the above Item C.5 are ready, the Program Coordiantor will arrange with the Financial Source the date of Meeting between the Borrower and the Financial Source for the Signature of the Loan Agreement.
The Meeting will be in Duby, London or Nassau. The charges of travel are by the Borrower himself. The Borrower will bring with him all the original Documents conerning personal Identity, Registration of Corporation, Authorizations of the Project, Business Plan, Proofs of ability to pay the Interest.
During the meeting, the Borrower has to explain himself the realization of the Project and its schedule of income.
The LOAN AGREEMENT is signed between Borrower and Financial Source.
7. STEP 7:
After the Signature of the Loan Agreement, the Financial Source and Borrower will engage Neutral Stakeholder Law Company for Stakeholder Services. This Stakeholder Law Company will communicate the Stakeholder Account opened in a Prime Bank.
8. STEP 8:
The Borrower gives order to his Bank to wiretransfer the Bank Loan Commitment Fee and the Stakeholder Service Fee to the Stakeholder Account.
9. STEP 9:
After reception of the above Fees, the Neutral Stakeholder Law Company will inform it to the Financial Source
10. STEP 10:
The Financial Source arranges the Issuance of the Bank Loan Commitment issued by a Standard and Poor’s International Commercial Bank rated ‘’A’’ or better.
11. STEP 11:
After the Issuance, the Financial Source informs the Neutral Stakeholder Law Company about the readiness of the Bank Loan Commitment for the viewing. Then the Neutral Stakeholder Law Company informs it to the Beneficiary (Borrower)
12. STEP 12:
The Beneficiary has to travel to Dubai (London, or Nassau) for viewing the Bank Loan Commitment with the Bank. If the Bank Loan Commitment is accepted by the Beneficiary and the Bank, they will sign the order to the Neutral Stakeholder Law Company to transfer the Bank Loan Commitment Fee from the Stakeholder Account to the Issuing Bank. The Bank Loan Document is ready now in exchange of loan amount. The charge of travel for viewing is for the Beneficiary.
13. STEP 13:
Against the Bank Loan Commitment, the Lender’s Bank pays the contracted loan according the Loan Agreement.
14. STEP 14:
The Borrower signs orders to his own Bank or to the Lender’s Bank to execute the payments of the Loan Commissions to all Intermediaries (Please see the above Item B.4)
15. STEP 15:
With engagement of private placement in HYIP, the Borrower signs Investment Agreement with the Trader Groups.
The quickness of realization of the above Steps depends on the Borrower side, principally on the following conditions:
- The availability of funds to cover the Bank Loan Commitment Fee (Item B.2)
- The availability of Proofs of ability to pay interest (Please see Item A.2)
- The readiness of the Borrower to travel for the Signature of Loan Agreement (Item C.6)
- The quickness of transfer of the Bank Loan Commitment Fee to Stakeholder Account (Item C.8)
- The readiness of the Borrower to travel for the Viewing Bank Loan Commitment (Item C.12)
- The arrangement of private placement in HYIP. The Program Coordinator can previously help this point to the Borrower (Item A.3 and Item C.15)
We are ready to provide you with further informations. All Specimen Documents for the SUSTAINED LOAN PROGRAMS are ready. Please ask our Associates for them.
by Prof.Dr.NGUYEN PHUC LIEN, Economist
Director of WIM-IMPACT SA. & of PAN ASIA CORPORATION (Switzerland)
Geneva 2001
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