PRIVATE EQUITY FUNDING

Q & A

 

Q. Does the private equity make loans on my collateral/assets?

A. No. The private equity is not a lender. There is nothing for the collateral/asset owner to pay back to the private equity. All monies received from the private equity is profit to the collateral/asset owner. (Project owners on the other hand that are seeking project funding, might incur debt that must be repaid to the collateral owner that they bring forward but that agreement is negotiated strictly between the collateral owner and the project owner.)

 

Q. Is the private equity trying to raise funds?

A. No. The private equity has tens of billions of dollars in cash inhouse as well as through already established capital partners.

 

Q. Since the private equity invests cash into various forms of trading... is the private equity another private placement program (PPP) like what we see floating around the Internet?

A. No. While the private equity does invest a certain portion of the funding cash into an array of asset managers... the private equity is not a private placement program nor does it operate like one. The private equity operates via a proprietary system of minimizing risk by spreading funding across multiple asset managers.

 

Q. What programs does the private equity offer?

A. The private equity doesn't offer any programs like many of us see in our inbox everyday. Everything they do is custom. The assets/collateral and the client's short-term as well as long-term goals are taken into consideration when master-minding what is win-win for all parties.

 

Q. What will my return be for allowing the title of my asset/collateral to be leveraged/liened?

A. Everything is subject to negotiation. Everything is custom. The private equity offers an upfront usage fee although a client can choose more money upfront or more money on the back-end of the transaction. 

    NOTE: It is understood that many of us get all kinds of offers everyday offering all kinds of claims about various  high-profit programs yet many of these programs are unwilling to substantiate their mechanisms for success. And often times these programs are not self-funded which directly exposes a client's assets/collateral to greater risk.

 

Q. Will my assets/collateral be mixed with the assets/collateral of others?

A. No. The private equity never mixes the funds from a client's funding with that of other clients. Under certain circumstance...if a client has multiple assets...that collection of assets can sometimes be packaged into a single contract.  A client and his/her assets/collateral are treated as their own profit center.

 

Q. Can the private equity prove they can perform?

A. The private equity ultimately negotiates and closes deals via both parties legal counsel representatives.. They are very corporate-style in operations. They are willing to evidence in a legal counsel to counsel manner that that the equity firm' as a company has had a zero-failure rate in regards to success since the company's inception/beginning.

 

Q. What risks are involved?

A. Anything that involves any type of investment involves a certain level/exposure to risk. An intelligent asset ownerinvestor seeks relationships that are experienced in minimizing risk while maximizing profits. Magister Operis recommends that a client wastes less time shopping maximum profits from one Internet myth against another... and more intelligently focuses on maximizing complete intelligent due diligence on one opportunity before moving on to another. If you keep Magister Operis intimately involved within your transaction lifecycle...Magister Operis will never suggest you sign anything that Magister Operis wouldn't sign itself nor suggest extended time be expended towards opportunities that don't have intelligent potential for significant results. 

 

Q. How much is the upfront usage fee paid by the equity firm to the asset/collateral owner?

A. The firm says 5-10% but everything is negotiable. You can't negotiate anything if you don't have your assets/collateral and supporting paperwork submitted to the private equity to negotiate against. So feel free to intelligently bring your documentation forward for an intelligent response .

 

Q. Can I bring my attorney to help negotiate and approve all contracts?

A. Absolutely! In fact...the only way the private equity negotiates and closes transactions is through the interaction between a client's legal counsel and the private equity's legal counsel. The private equity operates in a very corporate style manner.

 

Q. How is Magister Operis paid?

A. Depending on the nature of the overall responsibilities with the transaction... Magister Operis charges a negotiable commission/intermediary fee that is split as agreed with any other brokers/intermediaries involved. Everything is custom and everything is negotiable.

 

General LTV information: CLICK HERE

General profit information: CLICK HERE

Broker notes: CLICK HERE

Disclaimer: CLICK HERE

 

HOW FUNDING WORKS

 

It is very important to understand how funding against assets/collateral actually works.

  1. Asset/collateral documentation and client documentation is brought forward for review, organization, and consideration.
  2. If asset is of interest to private equity a call between the client and private equity.
  3. If asset/collateral continues to be of interest...private equity issues a non-disclosure agreement (NDA) to client to allow more open discussion between client and private equity.
  4. Client brings forth legal counsel to negotiate with private equity.
  5. Private equity issues commitment documents as per procedures.
  6. Contract is signed.
  7. Private equiy liens the asset collateral.
  8. Private equity releases cash equivalent of LTV (1:1) into escrow.
  9. Immediately from escrow clients upfront usage fee is paid to client as well as any commissions and/or corporate credit guarantor fees.
  10. Balance of escrow amount is spread across multiple asset managers in order to spread out risk.

 

LIENING/LEVERAGING THE ASSET/COLLATERAL

The first thing that must be understood is that the credit from the asset has be be able to transfer to the private equity in such a way that the world's financial systems respect and honor. Please understand that just because an asset has significant value does not always mean leveraging the value of the asset is a simple task.

The equity firm does a joint venture (JV) with the client in such a way that the client retains 100% ownership and the equity firm gets to leverage the value of the title for the duration of the contract.

How an asset would be liened would be similar to how a bank or mortgage company would lien an asset for the duration of a contract. These details will be orchestrated, negotiated, and agreed between the attorneys/legal counsel of both parties. Various factors including the asset type, custodial conditions, and local market conditions have to be taken into account.

 

LESSON A:

A playful example would be while cash is considered king... $20 Billion on pallets being stored in a wet cave in Somolia will have the respect of the world's financial systems. Consider that verifying the existence of the cash would not be easy, the secuity of the cash would not be predictable nor would the predictabiliy of the safe keeping conditions

 

LESSON B:

If you want to fund against a bag/jar of dirt from your backyard that has had a cash value underwriting certificate issued against it for $20 Billion...this might be as simple as having a bank take custody of the certificate and transfering the credit to the private via SWIFT. It is important to understand the underwriting certificate is a financial instrument and SWIFT messaging which includes full banking reponsibility is a bank instrument itself which the private equity can leverage rather than the jar of dirt itself. 

 

The two lesson examples above are very important to mentally grasp and understand when trying to bring forth non cash or cash equivalent assets  such as artwork, inground and above ground assets, etc.

The private equity has found that they can leveratge real estate depending on location using just a municipal valuation and then liening the real estate in favor of the private equity. Not every location work work with a municipal valuation but many locations in the United States will work using a municipal valuation. While a municipal valuation may not be high as a market valuation created by a credible third party... using a municipal valuation can save the real estate owner considerable time and expense.

 

LTV

The LTV assgned to the asset is formulated from a variety of factors including the description of the asset, the location of the asset, the custodial conditions of the title of the asset, market conditions, and other risk factors.  Without submission of full details of an asset it is impossible to be quoted/offered a LTV for owner/client consideration. 

 

General LTV information: CLICK HERE

General profit information: CLICK HERE

Broker notes: CLICK HERE

Disclaimer: CLICK HERE

USAGE FEE PAID TO CORPORATE CREDIT GUARANTORS

The private equtty firm is looking to pay an upfront above-market usage fee that allows the firm to leverage the credit of corporate guarantors.

 

PROCEDURES

1.       Client brings forth comprehensive details of credit lines to be packaged for submission.

2.       The firm issues non-disclosure agreement (NDA) to client.

3.       Client signs NDA and complies with GSI’s requirements to leverage asset/credit.

4.       The firm issues  Memorandum Of Understanding (MOU) document which outline immediate action to be taken by GSI.

5.       The firm issues Statement Of Action document that outlines the firm’s current business processes towards issuance of LOI and closing.

6.       The firm issues Letter of Intent (LOI) that outlines the firm’s clear intent to close the transaction. 

7.       Draft CONTRACT is issued.

8.       Both parties sign contract and transaction closes as per agreement.

 

General LTV information: CLICK HERE

General profit information: CLICK HERE

Broker notes: CLICK HERE

Disclaimer: CLICK HERE

 

SUBMISSION PACKAGE

 

In addition to needing direct access to principal parties in order to package the client's desires in an accurate manner... Magister Operis™ will need the following items submitted to get a competent response from the equity firm.

 

1.       Client Information Sheet (CIS)

o   Client info

o   Internal and/or External Legal Counsel

o   Banking and bank officer

2.       Copy of Passport

3.       Proof of the Asset

4.       Proof of Value

o   Statements

o   Appraisals

o   Municipal/tax valuations

5.       History of the Asset

6.       Authorization to Verify

7.       Available Information for income producing properties

o   Description

o   Gross Profit

o   Net Profit

8.       Time Table for Closure

9.       Any other supporting information

USAGE FEE PAID TO ASSET/COLLATERAL OWNERS

Collateral Based Funding

Collateral based funding is a financial mechanism in which the asset owner is paid an agreed usage fee or series of fees/profits for allowing the title of their assets to be leveraged for the purpose of generating profits. The fees paid to the asset/collateral owner within these arrangements are pure profit and has no loan attached.

 

·EXAMPLES OF ASSETS/COLLATERAL

  • Cash on deposit
  • Blue-chip stocks
  • Marketable securities
  • Commercial property
  • Factories
  • Industrial operations
  • Aircraft
  • Ships
  • Precious metals and stones
  • Cash-backed instruments
  • Real estate
  • Owned mines
  • Oil operations on owned land
  • Oil rigs

 

PROCEDURES

  1. Client brings forth comprehensive details of assets/collateral to be packaged for submission.
  2. The firm issues non-disclosure agreement (NDA) to client.
  3. Client signs NDA and complies with the firm’s requirements to leverage asset/credit.
  4. The firm issues Memorandum Of Understanding (MOU) document which outline immediate action to be taken by the firm. (Medium term MOUs are issued when applicable to transactions whereas 45 to 60 days are required to align transaction components.
  5. The firm issues Statement Of Action document that outlines the firm’s current business processes towards issuance of LOI and closing.
  6. The firm issues Letter of Intent (LOI) that outlines the firm’s clear intent to close the transaction. 
  7. Draft CONTRACT is issued.
  8. Both parties sign contract and transaction closes as per agreement.

 

General LTV information: CLICK HERE

General profit information: CLICK HERE

Broker notes: CLICK HERE

Disclaimer: CLICK HERE

 

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