Discounted Paper

Magister Operis works with buyers who purchase discounted bank and sovereign paper — medium-term notes and treasuries. Some buy with their own capital; others hold the bank and securities-house relationships to trigger a credit line against the paper. Their reasons vary — a buyer may intend to hold, or may choose to move the paper on — but in every case they want a discount deep enough to be protected either way: able to sell without loss should they ever choose to. The paper therefore has to be genuinely discounted, and more than one such buyer is active, so a well-priced, well-documented offer has somewhere to go.

Prefer to keep your upside rather than sell outright? See Joint Ventures.

Product type: Bank-issued medium-term notes (and, in some cases, corporate paper), U.S. Treasuries, and select Western European treasuries.

A note on corporate paper

Where corporate paper is offered, everything turns on the quality of the assets actually backing it. It is not uncommon for corporate paper to be marketed that is, in substance, backed by nothing. Real corporate paper stands on real, verifiable assets — and that is what a serious buyer expects to see evidenced.

Procedure

1. The seller provides a current custodial account statement, title page and/or securities-desk information, and the asking price.
2. The buyer issues a Letter of Intent and supporting paperwork confirming readiness to receive delivery.
3. Contracts are drafted to the agreed procedures, then signed and exchanged.
4. The seller delivers the instrument free and clear to the buyer's bank or brokerage for compliance and verification.
5. On verification, the paper is delivered into the buyer's account and the buyer initiates payment to the seller and intermediaries as agreed.
6. Further tranches continue as agreed.

Notes

Buyers will not engage without a clear picture of the ultimate beneficial owner (UBO) or titleholder of the instrument and every party in between. A seller who demands to see a buyer's proof of funds before evidencing that they own anything to sell, in our experience, usually owns nothing to sell.

Option paper: A seller who holds no title but genuinely holds a real option to sell on behalf of a titleholder is welcome, provided the transaction can proceed under conditions agreed in advance.

“Attorneys are happy to take your money writing the paper. Banks are happy to take your money listing it. And when you run out of money to keep it listed, the bank hands you back your worthless paper.”
— the chairman of an institutional partner to Magister Operis

Every engagement is governed by the firm's Method and Disclaimer; intermediaries should also review Broker 101 and the firm's Due Diligence standards.