Collateral Loan Info PDF
Collateral Loan Info PDF
Collateral Loan Info PDF
Highlights of Program
Luis Rodriguez
Private Merchant Banker
772-528-5800
[email protected]
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Collateral Loan
The Collateral Loan Program, commonly called the
CD PROGRAM, is an established system of
financing that uses traditional banking mechanisms
as its fundamental components. The result is a stable
st ructure that procures 100% monetary instrument
collateral for project financing. Using a well
calculated and balanced approach, the program
provides highly competitive benefits and profits to all
participants.
A CD/MTN (Certificate of Deposit/ Medium Term
Note) is merely a financial instrument that is backed
by cash, and is freely transferable. The general
st ructure of using the CD/MTN as a collateral
instrument has existed for 50 years. Naturally, there
are many firms and brokers who have used or
attempted to use CD/MTN instruments as collateral
in one way or another. Some professional firms have
been successful, but many inexperienced
intermediary brokers have failed.
The Program itself is a mechanism of structuring
third party collateral into the loan or funding package
for project financing. Since this structure must be
implemented through a series of complex legal
contracts between multiple participants in the
transaction, the CD/MTN Program must be managed
by a licensed law firm.
The particular group of Providers and their investors
who we work with have specialized in the system for
over 20 years. The providers and investors are
required by contract to participate in the program for
a minimum of 5 years, so it is a well established
system with reliable participants.
The No Interest Loan Program is one of the fastest
systems for capital loans, using collateral from a third
party investor, because the investor provides
collateral by means of a deposit to purchase a
Certificate of deposit (CD), the investor is called a
Depositor. The end result of the transaction is the
equivalent of an interest free loan (from the point of
view of the client) in most cases, where the Client
repays only a discounted amount of Capital, with
minimal risk and maximum benefit to both the bank
and the company.
The primary function of the structure is to procure
collateral from a third party at a discount, and
arrange for it to be paid for by the Borrower
Company from the loan funds at the time of
closing.
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Description of Participants
Applicant Company:
Issuing Bank:
Program Manager:
Funding Bank:
Manages a flow of qualified investment projects
from Applicant Companies, maintains contractual
relations with a group of Collateral Providers, and
maintains working relations with a group of
participating Funding Banks. The Program
Manager is not a participant in the transaction, but
coordinates and facilitates all stages of securing
the transaction.
Collateral Provider:
Maintains contractual relations with groups of
Depositors and Purchasers, and maintains
working relations with a group of participating
Issuing Banks. The collateral provider works
directly with Issuing Banks on behalf of
Depositors, and directly with Funding Banks on
behalf of Applicant Companies.
Depositor:
Purchases the CD/MTN as a financial instrument
for use as collateral, by making a deposit into the
Issuing Bank, to guarantee the loan to Applicant
Company from the Funding Bank. The Depositor
is usually a pension fund, trust, investment fund,
credit union, or a major multinational corporation.
Sometimes the Collateral Provider itself elects to
be the Depositor.
Purchaser:
Purchases the right of trust ownership of the
Interest component of the CD/MTN instrument
at a discount from the Depositor. He thereby
becomes the assigned beneficiary of the interest
st ream generated by the deposit. The Purchaser
is usually a government pension fund or private
trust. Sometimes this participant is not needed, as
the Depositor may prefer to remain the beneficiary
owner to receive increased profits over time.
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Fundamental Components
The following is an overview of the fundamental
components of the financing transaction:
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Preparation of Legal
Due Diligence Package
Funding sources have serious legal liability to their
investors, contributors and shareholders.
They do not have the right to give tens and
hundreds of millions of dollars just for a good
idea. They are legally obligated by national laws,
government regulatory agencies and international
law enforcement agencies to conduct the
necessary level of investigation, verification and
analysis of all relevant facts, on all facts, on all
territories related to the proposed projects
submitted to them. This work can be expensive,
because any mistakes could result in hundreds of
millions of dollars in judicial penalties or even
criminal liability for the sources and their
managers.
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Preparation of Investment
Project
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