By admin April 22nd, 2010, under Uncategorized
The US has the most mature and active capital markets structure in the world. This is no big surprise, of course, but there are a lot of established markets elsewhere in the world. We know the whole manufacturing base for the world seems to have shifted to China, but their capital markets are relatively young. In the Far East, Hong Kong, Japan, and Singapore all have more established and more actively traded markets than China in terms of their capital markets.
Not only that, each stock exchange has its own rules and each nation has its own rules. For example, if you own stock from one the countries I have listed so far, do you know which country doesn’t allow for shares of its companies to leave the country? Hint: It’s an island nation. Not much of a hint since Hong Kong, Japan and Singapore are all island nations right?
These rules that place limitations on movement or transfer of stock are known as restrictions. Some restrictions are not an issue in a securities loan and others are.
Stu
Southern Lending Solutions
Tags: foreign stock exchange, Hong Kong, restrictions, Singapore
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By admin April 6th, 2010, under finance, lending
My name is Todd Rome and I bring many years of experience from the finance industry to this blog. I hope over the next few months, many readers of this blog will gain insight to new financing instruments and trends available to them.
Todd Rome
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By admin April 2nd, 2010, under Uncategorized
MSCI Barra is barometer and provider of tools for the worlds emerging exchanges. Among many of its responsibilities is the the tracking of foreign indexes and providing metrics for savvy investors. MSCI touts a long history of the worlds markets and indexes along with sophisticated software systems to project trends in the global exchanges. In addition to providing real time data, MSCI Barra also holds conferences and web based seminars to educate investors the worlds markets.
Southern Lending Solutions
Todd Rome
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By admin March 29th, 2010, under Uncategorized
What is LIBOR and why do we use it?
LIBOR stands for London Interbank Offer Rate. It’s London’s equivalent of the Federal Funds Rate, the rate where banks lend overnight or short term to other banks. Just like the Prime Lending Rate is used with US banks for the establishment of their lending rates, LIBOR is used in the UK and frequently in other areas like parts of Western Europe.
Our primary funding resource is based in Western Europe so most of their payments out and payments in are based on LIBOR. Thus, our rates are based on LIBOR. LIBOR has rates for 1 month, 3 months, 6 months, and 1 year. We use the 3 months (90 day) index.
Today, 90 day LIBOR is at 0.28% and since our rates are based on a premium of 25-250 basis points (.25%-2.50%) over 90 day LIBOR that means clients are getting rates starting at 0.53% with a max of 2.78% over 3 yrs.
Stu
Southern Lending Solutions
Tags: Interest rates, LIBOR, Prime rate
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By admin March 19th, 2010, under Uncategorized
I thought I’d get away from the mechanics that show the flexibility and effectiveness of this program to use an example of how a company would use the program.
Imagine a tech company based in Singapore that works all over the world. They are a small, profitable public company on the main Singapore Stock Exchange. They see an opportunity to grow by engaging in a new market to sell their products and services, that market being India. The company needs $$ to advertise, market, open an office and put feet on the ground in the new market so it can bring in new business. Like many market expansions, the payback and profit wouldn’t be right away. In fact, their own analysis says it will probably take 3-4 years before all the upfront costs are absorbed and profit and positive cash flow generated from this market. Singapore participates in DTCC so their shares can qualify for our program.
The options for this company currently include:
1) Bank loan
2) Private Equity Investment called a PIPE
3) Secondary Stock Offering
4) Loan on Securities
Option 1 is out since if that was a possibility they would have done so already. Options 2 and 3 are 2 methods that work but do the same thing, reduce the current shareholders (that usually include upper management) percentage of ownership through dilution.
Option 4 does none of these and allows both the CEO and CFO (both of whom are major shareholders in the company) to pledge their shares in return for the funds required for the project. The lack of reduction of equity stake is especially attractive since the CEO and CFO are on the inside of the firm and believe this new market can increase the stock’s value by 50-200% over the next 4-5 yrs. They are in position to execute the growth program and believe in their abilities and the future growth prospects of the company.
Stu
Southern Lending Solutions
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By admin March 15th, 2010, under Uncategorized
The Depository Trust & Clearing Corporation was created to automate the process of clearing and settling of securities and other assets. In 2008, DTCC settled more than $1.88 quadrillion in securities transactions. The DTCC nvworks with over 110 different countries outside of the US. Prior to its creation, the transfer of securities was a labor intensive and cumbersome process involving bureaucratic red tape and redundant security procedures. Messengers hustled along the floors the worlds stock exchanges with envelopes tucked under their arms with the words “urgent delivery” stamped across them. The contents……..precious shares of company stock. The creation of the DTCC has enabled securities transactions all over the world in a safe and automated environment.
Southern Lending Solutions
Todd Rome
Tags: DTCC, finance, Securities, Stock Exchange
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By admin March 10th, 2010, under Uncategorized
Do you have full representation in foreign markets? Today’s economic climate has left many businesses scared to expand overseas . This may be the perfect time to seize the opportunity. Since most countries are excited to work with American businesses and the US dollar, exploring international opportunities may be just the action needed to set your business apart from the fray. As stated in previous posts, many US Companies have already exploited the opportunity of research and development in emerging countries. The cost for doing research is often cheaper and encourages commerce with foreign markets. Countries with new or growing markets represent an opportunity for American companies that lack direction.
Todd
Southern Lending Solutions
Tags: business, emerging markets, expansions, finance
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By admin March 9th, 2010, under Uncategorized
When you deposit $$ in a bank, the bank uses it to count to its capital requirements, which allows them to lend more. The bank benefits, the depositor benefits and the recipient of the loan benefits.Its a win/win/win situation. As stated in a previous post, their required ratio is known as a reserve requirement or how much a bank most keep in reserve.
Insurance is a funny business. They know how much revenue they will have right away because it comes from their insurance premiums. What they don’t know is what their expenses and profit/loss will be as they do not know how many claims will be filed for them to pay. The way they make the bulk of their $$ is how they manage that float of cash since that $$ may not stay with them and go out on claims. Insurers have capital requirements too, known as source capital. More source capital means more insurance policies written and more potential profit. When we do a repo trade with the insurer funding it, they get the benefit of getting to write between 3-6x as much in insurance policies as $$ they are lending out. This is a great deal for them and the client and this key multiplier is why its such a good deal for everyone.
Stu
Southern Lending Solutions
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By admin March 3rd, 2010, under Uncategorized
Many repo trade programs use third party (usually an attorney) escrow accounts. In fact, one very reputable one that we would recommend has exactly this policy. We have heard of many horror stories with escrow though as the securities are transferred in, payment transferred in, then securities transferred out and payment transferred out. That’s alot of moving parts and stories have surfaced of fraudulent activity and crazy things happening in the escrow process. Also, some of the private equity or hedge funds use escrow so they then can use the escrowed shares to raise the $$ to pay for the loan. Allowable but not completely desirable.
DVP stands for Delivery versus Payment. Securities transfer out and Payment transfers in. Both by Fed Wire, both instantaneous and very low risk. It also means the funding entity doesnt need the shares in order to fund it as the $$ must be available beforehand for an instantaneous transfer. Clients like this higher degree of safety.
Stu
Southern Lending Solutions
Tags: DVP, Escrow, Payment, Repo Trade
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By admin March 1st, 2010, under Uncategorized
Despite what everyone thinks…the American Stock Exchange (AMEX) is not the only one. There are many emerging countries with very strong exchanges. A few of these markets include: Indonesia, Cyprus, and Israel.
Israel is incredibly hot right now due to it strong economic growth. As many know, the pharmaceutical market is not only very lucrative but very expensive. The cost to do research overseas in countries such as Israel, is sometimes half of what it is in the US. This makes it very attractive for newer companies to base their research in Israel. Look for foreign exchanges such as the Tel Aviv stock exchange to become the new front in the stock market.
Todd
Southern Lending Solutions
Tags: Emerging Market, Exchanges, Israel, Stock Market
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