Skip to main content
MG CAPITAL GROUP INC. | PRIVATE FINANCIAL CONSULTING SERVICES

FAQ

At MG Capital, we're dedicated to helping you broaden your knowledge and learn about fewer corporate financing methods. Our team is committed to providing you with the tools and resources you need to access the same funding options that multinational businesses use to fund their expansion. Don't let a limited knowledge stop you. 

Funding Questions

Why are genuine funding instrument providers are so hard to find?

Why are Genuine funding instrument providers are so hard to find?

Issuing BGs and SBLCs requires a specialized financial skill set, and as such, genuine providers are few and far between.

High net-worth clients and business owners often need more expertise and time to navigate the issuing process, making a genuine provider’s expertise even more valuable. However, as providers are selective with whom they do business, working with a reputable provider is vital.


Unfortunately, many clients need to be made aware of the upfront fees associated with BGs and SBLCs and often fall prey to monetizers who fail to perform as per transaction procedures.


What is the purchase of BG or SBLC?

What is the purchase of a bank instrument such as BG or SBLC?

The purchase of a bank instrument, such as a BG or SBLC, allows the buyer to cash the instrument at its full-face value at the end of the year. When a buyer purchases a bank instrument from a provider, they gain access to its financial benefits.

How can a provider sell an SBLC or BG for almost half of its face value?

How can a provider sell an SBLC or BG for half of its face value?

When a provider sells a bank instrument, it is because they have a financial strategy that is well thought out via different trading programs or platforms that, with the cash received from the sale of the bank instrument, they can reinvest the cash for the full year in the commodity market and will, in turn, pay for the bank instrument itself. During this process, they will also make money.


For example, let’s say you purchase a BG or SBLC from MG Capital with a $100 million face value to be cashed in one year, and one day, you will pay $50 million to the company in cash. The company will deliver to you the purchased owned BG or SBLC. At the end of the year (1 year and 1 day), you will double your money 100%, guaranteed by the bank instrument. However, in the meantime, once the funds are received from the buyer on day one, MG Capital or their partners will place that $50 million into the trade market generating at least 10% (more or less) of profit each time they invest the funds.


MG Capital or their partners will get into a partnership agreement with a trading platform that has, for example, a pre-arrangement with a “Chemical Manufacturer” to deliver one container of chemical per week for the entire year, and each container will give them 10% of the profit. Each year has 52 weeks, meaning that when you take that 10% and multiply it by the 52 weeks that a year has, the total profit (TP) will be 520% ($260,000,000 million) of the funds received by the buyer, giving MG Capital or their partners enough funds to pay 100% of the face value of the bank instrument sold to the client and much profit left over to split between them and the trading platform.

Understanding Funding Instruments
It’s crucial to provide our clients with a clear understanding of the entire bank instrument sales process, from creation to maturity. Bank instruments are asset-backed notes issued by banks to clients, with a maturity of 5-10 years and an annual coupon or interest.

To truly grasp the purpose and functions of bank instruments, defining what they are is essential. Banks create paper notes (“IOUs”) that they sell to clients, guaranteeing a specific annual interest and maturity value. This allows investors to collect their expected profit while the bank accesses immediate cash to meet capital requirements for additional financing opportunities.

Bank instruments are different from bonds and are rather complex. Depending on the instrument, some offer high annual interest rates, are backed by top-rated banks, and are issued only in amounts of $20 million dollars or greater. The critical benefit of bank instruments is that they can be purchased at a discount from face value and traded to clients in the secondary market.

To make this topic more accessible, we’ve created a 5-step summary that clarifies how bank instruments evolve, their relation to private placement programs, and the benefits of purchasing bank notes. Contact us today to learn more about bank instruments and how they can benefit your business.
Funding instrument steps to maturation
Please note that the process below is the Banks’ and NOT MG Capital . Said differently, MG Capital  does not sell investment opportunities to anyone. MG Capital  works with registered dealers and brokers to properly structure or promote various funding instruments and programs.

Once the client or trader has been cleared through compliance, the issuing bank will “cut”/create an instrument (Medium Term Note or Bank Guarantee), naming the client or trader as the sole beneficiary. This instrument will have a predefined interest rate (0 – 7.5%/yr.) and a value on its maturity date. At this point, the purchaser would likely pay a discounted rate to the issuing bank, ranging from 60-90% of face value, depending on their relationships and the instrument’s size.

If the client chooses to hold the note, they collect interest and exercise the value upon maturity. If the initial purchaser were a “trader,” they would have a predefined “exit buyer” to buy the note at a higher value (ex., traders buy at 65, sell at 75). As you can see, with spreads like that, if the trader can consistently access instruments, they can organize a profitable private placement program.

Once the first purchaser has purchased the note, they usually resell it to another buyer at a higher price. Though the buyer isn’t purchasing the note directly from the bank, many private placement programs are run by intermediaries who fit right here. Usually, they will purchase the note and make a profit similar to what was made off them (ex., buy at 75, sell at 82). People in this position are usually high-net-worth individuals, large corporations, hedge funds, etc.

The final middleman repeats the process the others have done, but they look for a different type of buyer. In this case, the note has been traded several times and is at a smaller discount than initially; for many, that may not be appealing, but for some, that seems intriguing and less risky. 

Since everyone can verify that the instrument has been owned by several companies (“seasoned”), institutional buyers such as pension funds, hedge funds, mutual funds, and other low-risk ventures flock for security and higher yields. As expected, the final middleman usually sells the note to an institutional buyer for a profit like what was made off them (ex., buy at 82, sell at 90).

The final purchaser holds the note, collecting the difference between the discount they paid vs. face value and the annual interest until its maturity. Though the information above is accurate, the spreads per trade may vary depending on several variables. To state the obvious, different traders, banks, relationships, and strategies can make prices/profits fluctuate.
Standby Letter of Credits- (SBLC)

A Standby Letter of Credit (SBLC) is a bank’s commitment of payment to a third party if the bank’s client defaults on an agreement. Commonly called or well-known in the financial market as a Bank Guarantee (BG) or Standby Letter of Credit (SBLC).

It is a “standby” agreement because the bank will have to pay only in a worst-case scenario. A Standby Letter of Credit is used mainly in the US, where banks are legally barred from issuing certain guarantees. It serves as a parallel (collateral) payment source if the primary source fails to meet its obligations in part or total and is a substitute for a performance bond or payment guarantee. Hence it is called standby credit.


An SBLC is most often sought by a business to help it obtain a contract. There are two main types of SBLC:


A financial SBLC guarantees payment for goods/services as specified by an agreement.

A performance SBLC, which is less common, guarantees that the client will complete the project outlined in a contract. The bank agrees to reimburse the third party if its client fails to complete the project.


Bank instruments enhance the client’s credit, allowing them to access large amounts of capital simultaneously.


Procurement

MG Capital procures Standby Letters of Credit (SBLCs) mainly from the top 25 rated banks with a minimum face value of $20 million.


Monetization

MG Capital may also provide and/or monetize SBLCs on other top-tier rated and non-rated banks.


Purchase of Standby Letter of Credit (SBLC)


MG Capital offers many types of financial services to those seeking to fund their financial endeavours. We work with many private lenders and banking institutions to fulfill your financial needs. There are many ways to arrange non-recourse collateral, recourse collateral, or credit enhancement.

We help to get clients fresh-cut SBLCs from the world’s top 50 banks; issuing banks use SWIFT Network to deliver SBLCs


Advantages of purchasing a Standby Letter Of Credit (SBLC) from us.

  • We purchase SBLCs from the top 20 world banks.
  • We offer monetization of the instruments in case the clients need this service.
  • SBLC is available in EUR and USD.
  • Price varies on a week-by-week basis on market conditions. Generally speaking, the price for the world’s top 50 banks is 50 – 53% + 2% broker fee; However, we can acquire banking instruments at below-market prices.
  • The owned bank instruments can be called back for their total face value at the end of the year since it is yours to cash out.
  • The minimum face value for selling a Standby Letter of Credit (SBLC) purchase is $20 million.
  • After receiving the MT760, the client has five (5) to seven (7) banking days to complete the payment.
  • Pre-advice for the MT799 is included along with the SBLC.
  • No documentation for your project required
  • The agreement is signed and returned within 72 hours of completion.
  • MT760 offers SWIFT delivery to your bank.
  • Brokers receive up to 0.5% commission.
  • SBLC is specific to each client’s needs (on best effort basis).

Standby Letter of Credit Monetization


SERVICE AND INSTRUMENT DESCRIPTION:


Complete Recourse Loan and Non-Recourse Loan monetization of Standby Letter Of Credit (SBLC) for the intention of project funding. This is the agreement we contractually have with our clients and MG Capital. We never require our clients to pay upfront fees for monetization and are only compensated when a project is completed. But in some cases the fee may be required.


There are four monetizations that we use:

  1. Bank SWIFT. This (BG) is delivered between the two banks through SWIFT MT799 and SWIFT MT760.
  2. The monetizer must return the Standby Letter of Credit (SBLC) to the issuing bank 15 days before the Standby Letter of Credit (SBLC) expiration. 
  3. Monetization LTV for a Non-Recourse Loan (this loan has a lower LTV, but you don’t have to pay it back):
  4. Our LTV varies from 8% to 100% depending on the bank’s credit rating, the issuing city, the languaging of the buying instrument, and the client’s needs.


How long does it take?

7- 10 banking days after the paperwork has been submitted and the instrument has been sent via SWIFT to our monetizer.


Disbursement of funds

  • If it is less than $ 500 Million USD or EU, the payment has to be
  • The funds are disbursed in 12 months.
  • Once the MT-760 is authenticated, three weeks later, 20% of the funds will be disbursed.
  • A month after the original disbursement, 20% more will be given.
  • Finally, the last 60% of the funds will be divided over the remaining ten months and distributed monthly.

Our closing process

SWIFT Closing Process

  • Once the paperwork is completed, the client sends SWIFT MT799 to the bank to set up the release.
  • After receiving the SWIFT MT799 from the client’s bank, the Monetizer’s bank will reply with a SWIFT MT799 RWA to receive.
  • Once the client’s bank receives the RWA to receive the bank instrument, the client sends SWIFT MT 760 to the monetizer’s bank.
  • Once these SWIFT MT 760 are received and authenticated, the monetizers must respond within a week to grant the non-recourse loan.
  • At the end of a year, the Monetizer has to return the SBLC within 15 days of the anniversary of the contract.


Required Documents:

  • Fill out the Bank Instrument Monetization Application.
  • Complete the Bank Instrument Monetization Application and email it.


Compliance Standard:

  • Accepted Standard: MUST be delivered by SWIFT.
  • Rejected Standard: Bank Instruments from the Forbidden Assets and Financial Instrument Providers List.


Important Information:

Please note that the days are banking days, and weekends or holidays are not counted.


Banking Days & Holidays Calculator

With our bank instrument monetization services, everything is non-negotiable. We will not alter the procedures of this service.

The compliance department may ask for the last three bank statements of the bank account from where the bank instrument will be issued to start processing a monetization application.


Clients typically use this tactic to shop around for a bank Instrument with a provider institution with a banking letter confirming there is a credit line ready to incentivize the provider to send a bank instrument on their behalf. We will never allow this to happen under our company name. We don’t issue RWA or BCL letters.


Recourse Loan Disbursements Example ($10 Million Dollars):

  • Bank instrument face value: $10,000,000
  • Recourse Loan disbursement (80%): $8,000,000
  • Loan commission fees (5%): $400,000
  • Total Loan Disbursement:$7,600,000

Non-Recourse Loan Disbursements Example ($10 Million Dollars):

  • Bank instrument face value: $10,000,000
  • Recourse Loan disbursement (65%)
  • Loan commission fees (5%)

Note: The above procedures and numbers are subject to change.
Bank Gaurantees

Bank Guarantees

Banks Guarantees are written obligations of the issuing bank to pay a sum to a beneficiary on behalf of their customer if the customer himself does not pay the beneficiary. It is important to note that these Bank Guarantees apply only whenever the issuing bank’s guarantee is not contingent on the existence, validity and enforceability of its customer’s obligation. This is called an “abstract” guarantee (i.e., the bank’s obligation is to pay regardless of any disputes between its customer and the beneficiary).

The issuance of bank guarantees is a private transaction and does not result in the issuance of publicly tradable instruments.

Purchase of Bank Guarantees

AltFunds Global offers financial instruments to those seeking to fund their financial endeavours. There are many ways to arrange non-recourse collateral, recourse collateral, or credit enhancement. We work with many investors from Europe and North American banking institutions.

The world’s top 50 banks issue our Bank Guarantee (BG) purchase, and we use the bank’s SWIFT Network to deliver these banking instruments. We achieve this using SWIFT MT799 and SWIFT MT760.


Advantages of purchasing a Bank Guarantee (BG) from us:

  • Our providers operates with the top 50 world banks to secure your Bank Guarantee.
  • We offer monetization for our bank instrument in case clients need this service.
  • BG is available in EUR and USD.
  • Price varies week by week based on market conditions. Generally speaking, the price for the world’s top 50 banks is 50 – 53% + 2% broker fee; However, we can acquire banking instruments at below-market prices.
  • The bank instruments can be called back for their total face value at the end of the year since it is yours to cash out.
  • The minimum face value for selling a Purchase Bank Guarantee (BG) is $20 million.
  • After receiving the MT760, you have five (5) to seven (7) banking days to complete your payment.
  • Pre-advice for the MT799 is included along with the BG.
  • No documentation for your project required
  • The agreement is signed and returned within 72 hours of completion.
  • MT760 offers SWIFT delivery to your bank.
  • We offer Bloomberg, Euroclear, or DTC delivery to your bank.
  • Brokers receive up to 0.5% commission.
  • BG is specific to each client’s needs.
  • The deposit is 100 % protected, and the provider bank endorses client payout.

Bank Guarantee (BG) monetization

Total recourse loan and non-recourse loan monetization of Bank Guarantees (BG) for the intention of project funding. This is the agreement that we contractually have with MG Capital. We never require our clients to pay upfront fees for monetization and are only compensated when a project is completed. 


We can monetize this through a Bank Guarantee and provide you with a loan through careful negotiations with an attorney-trustee office. This is a loan that you will very seldom have to pay back, and if you do end up having payments, they will be at a low rate. Our clients will receive their funds from an attorney trust bank account with a legal opinion, so our clients won’t have to deal with problems in releasing their funds with their local banks.


There are four monetizations that we use:

Bank SWIFT: This (BG) is delivered between the two banks through SWIFT MT799 and SWIFT MT760.


We can purchase the BG in full, or the client can hold ownership against an Owned Bank Guarantee. Many clients choose the latter option to have a non-recourse loan. Through our contractual obligations, the monetizer must return the Owned Bank Guarantee to the issuing institution at least 15 days before the expiration date of the BG.


Monetization LTV for a non-recourse loan (This loan has a lower LTV, but you don’t have to pay it back)


Our LTV varies from 8% to 100% depending on the bank’s credit rating, the issuing city, the languaging of the buying instrument, and the client’s needs.


Note: 5% commission is paid on non-recourse and recourse loans (Our corporation doesn’t monetize bank instruments from non-rated banks).

How long does it take?

7- 10 banking days after the paperwork has been submitted and the instrument has been sent via SWIFT to our monetizer.


Disbursement of Loan

The loan is disbursed in 12 months.

Once the MT-760 is authenticated, three weeks later, 20% of the loan will be disbursed. A month after the original disbursement, 20% more will be given.

Finally, the last 60% of the loan will be divided over the remaining ten-month period and distributed monthly.

Our Closing Process:

SWIFT closing process

  • Once the paperwork is completed, the client sends SWIFT MT799 to the bank to set up the release.
  • After receiving the SWIFT MT 799 from the client’s bank, the monetizer’s bank will reply with a SWIFT MT 799 RWA to receive.
  • Once the client’s bank receives the RWA to receive the bank instrument, the client sends SWIFT MT 760 to the monetizer’s bank.
  • Once these SWIFT MT 760 are received and authenticated, the monetizers must respond within a week to grant the non-recourse loan.
  • At the end of a year, the monetizer has to return the BG within 15 days of the anniversary of the contract.


Note: Procedures, numbers and requirements are subject to be changed.


Bank Instrument Monetization

We monetize instruments that have already been issued (SBLCs, DLCs, CDs, etc.). The minimum instrument size is $20 million, and our fees are 1.5% plus broker fees. 


You can start with our Monetizing Banking Instruments (MBI) program.


SBLC needs to be monetized. This is the credit enhancement as the client has a bank instrument to borrow against it.

SBLC can generally be monetized at up to 80%, on face value, depending on the issuing bank rating and the issuing city; for example, a $100M SBLC issued by a top-rated bank can deliver the client $80 million minus the commissions.


Recourse: MG Capital facilitates the distribution of all recourse SBLCs into non-recourse SBLCs by participating in buy/sell programs of the monetized value and relieving the client of the burden of paying back the SBLC.


Non-Recourse – the monetization may be non-recourse – with no need to pay the monetizer back. The monetizer is responsible for paying off the SBLC. This strategy usually generates a lower LTV.

Letters of Credit

MG Capital can issue, accept and monetizes Letters of Credit (LC) with top-rated and non-rated banks. This instrument is usually used in global trade finance and credit enhancement. Some conditions will apply depending on the banking institution.


A Letter of Credit (LC) is a bank service ensuring payment of the amount indicated in the letter of credit to the seller as per the buyer’s instructions against the shipment of goods, performance of other conditions stipulated in the letter of credit and submission of relevant documents.


Thus, upon transfer of ownership over the goods sent by the seller to the buyer and submission of the document confirming the fulfillment of other conditions of the LC, the bank (issuer) will ensure the transfer of payment to the seller’s account.


Advantages of LC for the buyer:

  • Elimination of risk of losing money for the buyer
  • Payments are made after fulfillment of the seller’s contractual obligations
  • Transfer of ownership over shipped goods to the buyer within the period indicated in the LC and according to other terms

Advantages of LC for the Seller:

  • Guarantee of payment independent of the buyer (subject to the fulfillment of contractual obligations)
  • Possibility of payment before handing the goods over to the buyer
  • Possibility of execution of complex commercial contracts
Medium Term Notes

Medium Term Notes

This debt instrument has a date of maturity and a face value annual interest rate and is sold by the central banks to investors. Term maturity is typically 5-10 years and is used for large projects with financing requirements and a need for more solid investors. This type of funding can be used as collateral, place a lien and monetization. unclear


MG Capital partners can issue MTN through the world’s top 50 banks and use Swift MT760/799.

 

How we protect our client’s deposits

  • You never have to worry about your security with our three levels of protection: (note: the rest of this is a link).
  • Selected and Frequent Bankers/Providers have been vetted by third party investigating company.
  • The client can deposit their capital or asset in one of our trusted attorneys’ IOLTA Trust accounts.

General Frequently Asked Questions

IS IT OK IF I SEND A COPY OF MY BANK INSTRUMENT FOR YOUR VERIFICATION?

No. Due to the amount of inquiries we receive. The Bank Instrument must be issued from a  A+ rated Bank in a rated Jurisdiction. But if the instrument is already issued then YES you have to send a copy of instrument and full CIS-KYC of the owner of instrument.

IF A BANK IS A DIGITAL ONLINE BANK, DOES IT QUALIFY FOR MONETIZING AND TRADING?

No. You should move your account to an A Rated or AA Rated bank.

​CAN YOU TELL ME WHAT THE RETURNS WILL BE?

No. Only brokers and rep’s give that kind of information to the potential clients and they are often not realistic. It is against the law to quote actual returns from a trading platform or to provide written or verbal amounts outside of the actual contract. That is why the term “historical returns” are quoted.

WHEN YOU RECEIVE THE TRADE CONTRACT ARE YOU UNDER OBLIGATION TO AGREE TO IT?

No. The client is not under any obligation to accept the terms or the ROI’s that will be provided in the verbiage of the trade contract.

DO YOU ACCEPT LTN’S OR BONDS FOR MONETIZING AND TRADE?

There are occasional programs available for LTN’s, please contact us for availability. ​The bonds would need to be on Euroclear and sometimes the trader will pay the costs involved.

The most important thing is REALITY! NO ASSIGNEES, OR BENEFICIAL OWNERS, etc. FULL KYC, including tax receipts, and full set of bond documents are required.

Note: We do not accept historical bonds.

​CAN I MONETIZE WITHOUT TRADING FOR 40 WEEKS?

Yes. We have Monetizers for Bank Instruments either Leased or Purchased. The LTV depends on the rating of the issuing Bank 35-50% for Leased Instruments, Up to 80% for owned Instruments. Again these numbers are not final, the LTV will depend on the rating of issuing bank and nature of bank instrument too.

CAN I USE A GENERIC KYC PACKAGE?

No. The KYC Package must be the one supplied by us. All KYC Documents must be with current date. Packages more than 3 days old will be rejected. Client has to provide the copy of passport first.

​DO YOU PROVIDE A BULLET THEN A 40-WEEK TRADE?

Depends on the program you are entering and if a bullet is available, in a lot of cases yes but not always.
If a bullet is available you would be notified after passing compliance.

DO YOU PROVIDE WEEKLY PAYOUTS?

​Yes, almost all programs are weekly payouts, unless stated differently in contract.

​CAN I RECEIVE AN ADMIN HOLD TO BLOCK OUR FUNDS?

Yes, The admin hold/block will in favor of the trader for the term of the trade when it is released unencumbered and without liens back in favor of account holder.

DO YOU ACCEPT HERITAGE FUNDS FOR TRADING?

Some of our Traders accept those and Yes, providing you can produce an up to date bank statement and have access to the funds and they are not in a sub account.

​CAN YOU TRADE BLOCKED FUNDS?

​No, the funds must be free and unencumbered.

CAN YOU ACCEPT A MT-760 FOR TRADE?

​Yes, but must be cash backed and from an A rated or AA rated bank.

​WHICH IS AN ACCEPTABLE BANK?

Bank must be a minimum B+ rating in a rated Jurisdiction, with the ability to issue either an MT760, 799, 542 or an admin hold or block.

CAN I SEE A DRAFT COPY OF THE CONTRACT BEFORE I SUBMIT MY DOCUMENTS?

​No, The contract is strictly confidential between the client and trade group and can only be issued after client has passed compliance.

WHAT IS THE PROCEDURE, HOW LONG DOES IT TAKE?

There is a set procedure to follow:

1.) Submit a KYC (Know Your Client) package, complete with a copy of your passport and either a Bank Statement, or a copy of the Bank Instrument.
2.) The compliance department will complete due diligence on yourself and the funds or Bank Instrument which takes between 5-7 working days depending on how busy they are.
3.) If you pass compliance a contract will be issued.
4.) If required there will be a call between between yourself and the compliance department to answer any questions you may have.
5.) You sign and return the contract.
6.) You contact your bank to either issue the required swift or put the admin hold block in place. This can take between 2-5 days depending on the Bank.
7.) Once the swift or block is in place the trade would start usually within  72 hours.

HOW DOES THE ADMIN HOLD OR BLOCK WORK?

The funds or Bank Instrument is blocked in favor of the trader. The trader uses the asset to draw a credit line from his bank to trigger the trade. At the end of the trade term the block is released unencumbered bank to the asset owner.

IS THERE ANY RISK INVOLVED?

No, the Funds or Instrument are only used by the trader to draw a credit line and are left unencumbered.

​IS IT POSSIBLE FOR THE PRIVATE INVESTMENT PROGRAM TO LOSE OR HAVE A POOR RETURN?

No. As mentioned in the previous Q/A every trade has a net positive return. Typically the minimum spread is 10% or more. So for every $100MM trade of bank notes the Private Investment Program will make 10% or more. It is not possible for the trader or investor to lose. It is not possible for the trader to make less. Every trade has a known net positive return before the trade is made. Traders will make these trades hourly and daily, so over a month period the 50% to 100%plus return is assured for the investors. The traders make double those numbers, however they split the profits with the investor. The exact information will be mentioned in the contract once you get it from trader.

HOW CAN THE RETURNS BE AS ATTRACTIVE AS REPRESENTED?

Private Investment Programs only trade prime bank notes by arbitrage. What arbitrage means is that the buy and sell contracts have to be “in hand” before the trade of the discounted banknotes take place. This is the safest way to trade because the deal is done before the deal takes place. This is all done by the trader for the Private Investment Programs. Since in the Private Investment Program traders only buy notes when they have a buyer at a higher price every trade has a net positive gain due to the “controlled trading” practices. There is zero risk to the Program traders, and zero risk to the bank, and zero risk to the investor

LTN Frequently Asked Questions

About LTN Purchase Program that is Available and on How to Work with MG Capital Group Inc. on LTNs

Submit LTN Enquiry
LTN Frequently Asked Questions

About LTN Purchase Program that is available and on how to work with us on LTNs

SUBMISSION PACKAGE

Why does this purchase program require copies of physical bond documents when bond information is available by black screens?

The LTN Program wants to make sure that the bond owner can provide them because (1) they will be the basis for the “Safekeeping Receipt” at the transaction bank and (2) they will need to be conveyed along with the physical bond to the buyer at closing. Once the transaction starts moving forward and the Program Facilitator is investing their money in up-front costs, they want the transaction to close as quickly as possible and to not be delayed by bond owners having to go out and obtain updated documents at that late date.

Why are STN documents with stamped dates between 2017-2020 required? 
As of January 2017, Tesouro Nacional and Banco Central do Brasil (BCB) put in place a new bond authentication process. As of that date the transaction bank can verify the ownership, documents and the authenticity of a bond utilizing a secure bank to bank online portal. This new authentication method no longer requires SWIFT communications with BCB and reduces the time and expense associated with verification and due-diligence.  Bonds documents actualized prior to 2017 do not have the codes issued to utilize the new verification system. 

Why will a current Transport document be required before closing?
This is a requirement of the transaction bank. A current and valid transport certificate is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipts with full banking responsibility. The transport will also be required by the buyer when the instrument is conveyed at the time of closing. Both parties must be confident that there will be no legal complications with Brazilian authorities. 

Why will a current GRU and receipt be required before closing?
A current and valid proof that all taxes due on the LTN is required by the bank when they receive the instruments and associated documents so that they can accept bonds and issue a safekeeping receipt with full banking responsibility.

Why won’t the purchase program compromise on their list of “required” documents?
This LTN purchase program is designed to convert a worthless LTN bond into a cash-backed Global Note that is recognized by the market as having value. This involves cash-backing by a reputable bank and creating an instrument that can be traded on the secondary market. To accomplish these objectives, the program facilitator must meet stringent banking requirements for each of these tasks. The requirements for updated documents come from the transaction banks, not from the Program Facilitator. 

PROCEDURES

After fully meeting submission requirements, are any of the program procedures negotiable?
It is possible that some procedures may be modified, however, any proposed exceptions or deviations from the standard procedures outlined in the Prospectus would need to be submitted in writing and be reviewed and approved by at least the Program Facilitator and the transaction bank and perhaps also by the Buyer and by Euroclear attorneys. It will be difficult to change the standard procedures that have been negotiated with and approved by the attorneys of several entities.

Why is the program prospectus so long and detailed?
The international banking community and banking regulators require full disclosure of every aspect of the program for sophisticated investors and their attorneys to review. The document is prepared by lawyers and must be approved (1) by a reputable financial services firm (Deloitte Touché), (2) the transaction bank, (3) the potential buyers, and (4) the Euroclear exchange attorneys. All relevant information must be included in this document, including every conceivable potential risk.   

Since my bonds are already located in a reputable storage facility in Europe, why do my bonds have to be put into safe-keeping in the transaction bank?
The transaction bank must secure the bond in their facility to issue a Safekeeping Receipt with full banking responsibility and then to load the bonds onto the Euroclear exchange. This cannot be done if they do not have control of the instrument and supporting documentation. Furthermore, the transaction bank must be able to convey bonds to buyers at closing. Again, they cannot convey the bonds if they are being held by another institution

TIMING

How long does the LTN purchase process take?


There are several purchase process factors for which there are no definitive allocations of time, such as: (1) prioritization of a specific bond in the queue, (2) speed of processing bonds in the queue [see note below], (3) identification of a specific buyer for a bond, (4) bond owner return of executed sales and purchase agreement (SPA), (5) bond owner delivery of bonds to be transacted. It is only after the SPA is executed and the bonds are delivered to the transaction bank that reasonable timing predictions can be made for the conclusion of the transaction: approximately 20 banking days.


[NOTE] Queue processing speed is also affected by the: buying appetite and financial capacity of institutional buyers, financial capacity of transaction banks, number of transaction banks, and timing of adding additional transaction banks. 

After I submit my bond portfolio to MG Capital, how many bank days will it take . . . *


* For program review and registration of my submission? 


It should take MG Capital no longer than five to seven working days to review bond packages. When we determine that a package is complete, SRM then attempts to register the bond owner with the Program Facilitator. If there are no registration conflicts, the bonds are placed into the existing bond portfolio queue.


* To get to the top of the queue?


At the time of submission, each bond will be registered at the bottom of the queue and will be selected as the bonds above it are sold. While the portfolio queue is growing, the Program Facilitator also has a growing list of transaction banks and, as more  transaction banks are engaged, the capacity to close more bonds at the same time will increase. 


* To receive my prospectus? 


We are unable to predict this this because issuance of the prospectus will depend on the completion of all the following: (1) In-take officer compliance approval, (2) Program Facilitator acceptance and registration, (3) Bond prioritization in the queue, (4) Selection of a buyer, and (5) Issuance and delivery of a Registered Prospectus. In addition, the timing of this task is dependent on the number of bonds in the queue at the time of submission.   

After I sign and return my prospectus agreements, how long will it take to receive a Sale and Purchase Agreement (SPA)?
Once a bond is selected by a buyer, an SPA can be issued in about 5 banking days. After the bond owner accepts the terms and signs and returns the SPA, the transaction process will move rather quickly.

After I execute the Sale and Purchase Agreement . . . *


* How fast will I learn the location of the transaction bank?


The location of the transaction bank is revealed in the SPA.


* How quickly do I need to deliver my bonds to the transaction bank?


Immediately or within a few days. Once the SPA is written, bond delivery must be completed without delay and within a reasonable amount of time. Extended delay might cause the offer to be delayed or even cancelled. 


* How long will it take to get a closing date scheduled?


Closing dates are not scheduled until (1) bonds are delivered to the closing bank, (2) a safe keeping receipt is issued, (3) the bond is backed with a cash value, and (4) loaded onto Euroclear. If all goes well this process can be accomplished in 15-20 banking days. 


* How long will it take to close?


On the scheduled day, closing will only take a few hours at the transaction bank.


* How long will it take to receive my sales proceeds?


Settlement of sale proceeds is expected in 3 banking days.


TRANSACTION

How large is the bond portfolio queue?


The queue of registered LTN packages is sizeable and growing steadily as additional portfolios are submitted and accepted. SRM's portfolio queue totaled 100 packages by end of September, 2020. The more highly prioritized and desired H-series bond portfolios make up less than half of the total number of registered bond portfolios. 

Who are the buyers?
The Buyers are large financial institutions and international corporations, but the actual identity of these Buyers is confidential.

How many options are there for transaction banks?
Currently, there are two transaction banks approved with additional banks to come online soon.

Why is the transaction closing restricted to so few banks? 
Bank attorneys must review and approve the prospectus and they must register with BCB to access the secured portal through which bonds are authenticated on a bank-to-bank basis.

Can the bond owner choose where his sales proceeds are delivered?
The bond owner’s sale proceeds will be quickly delivered to a secure account established in the bond owner’s name by the Program Facilitator. After the funds arrive in that “smart fund” account, the bond owner can move them to any location at their own discretion.

CLOSING

Why does the closing need to be in Europe?


The closing takes place at an approved and compliant transaction bank. Since Europe is where most of the critical operations of the Program Facilitator take place, all transaction banks are expected to be in Europe.

Can the seller select the county, city, and bank where the closing will take place?


No

Does the bond seller need to be present at closing?


No

Can the bond seller be present at closing if he wants to be present?


Yes

TRADE OPPORTUNITIES

Will the program facilitators offer any trade opportunities to me after closing?


Possibly.

Will MG Capital offer any cash-trade opportunities to me after closing?


Yes. Shortly after the date when bond owners receive their sale proceeds, MG Capital will request the bond owners to consider at least one or two different private cash-trade programs. 

HOW TO WORK WITH MG CAPITAL ON LTNS

What is MG Capital LTN processing model?


MG Capital will work primarily with the consultant who introduced the LTN bond owner to us. We do not wish to engage more than one consultant in the process to ensure the requirements are clearly understood and any questions are relayed through the Introducing Consultant. All other consultants must be willing to step aside and allow MG Capital to work with the Introducing Consultant and/or directly with the bond owner or their legal representative.

How is MG Capital connected to the available LTN purchase program?


MG Capital does not have a relationship with the principals of this purchase program, but we do have a ten-year relationship with an LTN associate who is managing the portfolio queue for the purchase program that is available. Since 2013, this associate has been primary access point to LTN programs. Over the past several years, MG Capital and our well-connected associate have worked together closely and just recently we have adopted a new LTN business model that permits our associate to focus his energies on providing intake services for LTN programs while MG Capital functions as the marketing arm and as the in-take desk for our associate. We are in daily contact, coordinating incoming files, discussing priorities and refining our LTN in-take system.

What is the compensation arrangement for consultants?


The official commission being paid by this purchase program will be much smaller than originally expected and it is already 100% taken. Now it is necessary for both MG Capital (representing the program-side consultants on the MG Capital LTN Team) and for any other consultants between MG Capital and the bond owner (client-side consultants) to arrange for compensation from the bond owner. This can be done jointly through an agreement known as a Profit-Share Agreement (PSA).

What PSA percentages does MG Capital feel is appropriate for consultants who provide services required for a successful transaction? 


MG Capital believes the LTN world already is full of too many examples of greed and over-reaching by intermediaries. We have commonly seen examples of intermediaries asking for high percentage levels of compensation ranging from 20-50% of bond owners’ sale/trade proceeds. We feel that such compensation levels border on the obscene and take unfair advantage of bond owners for no apparent reason other than the greed of intermediaries. MG Capital believes that the total PSA compensation requested from a bond owner, for both program-side and client-side consultants, is reasonable if it stays within the range of 5-15% of bond owner proceeds. MG Capital also believes that the higher percentage levels in this range should only be requested if a large number of consultants are "actively" engaged/working on behalf of the bond owner. 

What does MG Capital believe about the relative value of the contribution made by program-side consultants compared to client-side consultants?


Not surprisingly, and simply put, MG Capital believes that the major contribution is being made by the program-side consultants. In traditional financial transactions it is understood that, since it takes both a buyer and a seller, the facilitator bringing each respective side is making an “equal” contribution to the business effort. MG Capital does not believe this approach is relevant to LTN transactions. Anyone who has been involved with LTNs knows how “easy” it is to find an LTN owner who has been looking for years for a program solution and how “hard” it is to find an LTN program that works. Therefore, MG Capital believes that the party who brings the program to the table is the party who is making the bigger contribution—and that that party should be rewarded accordingly.

How many members are involved on the MG Capital LTN Team?


The MG Capital LTN team is made up of 4 parties whose primary functions are in the areas of administration, banking/paymasters, Portuguese communication and marketing.

What range of PSA percentages are requested by the MG Capital LTN team?


Depending on the circumstances of each potential transaction, MG Capital will request PSA compensation percentages ranging from 5-10% for the services provided by its team of 4 program-side members. SRM submits a bond owner's LTN package directly to the program in-take desk. We know how valuable this service is.

Will the PSA document that MG Capital creates request the bond owner to provide compensation for both program-side consultants and client-side consultants?


Yes. All client-side consultants will be signatories to the section of the PSA that indicates the commission amounts due to each consultant. Client-side consultants always have the option to have their own compensation agreement directly with the bond owner, however, if they make a separate compensation arrangement with the bond owner they will not be eligible to participate in any part of the compensation flowing from MG Capital's PSA.

How will the requested total PSA % amount be determined?


The total PSA % amount will be based on the total number of consultants involved in a transaction, including MG Capital’s program-side team of 4 plus the total number of all “working” client-side consultants. The total PSA % amount typically ranges from 5-15%, with 15% being the maximum PSA amount requested. MG Capital believes that consultant compensation should be modest and that a very high portion of transaction proceeds should stay with the bond owner.

How will MG Capital split PSA compensation with working client-side consultants?


After allocating the first 2% of the total PSA percentage to itself for providing the LTN program, MG Capital will then divide the remaining PSA percentage amount by the total number of consultants and allocate that percentage amount to each “working” client-side consultant on an equal basis.
 
How will MG Capital arrange for the payment of compensation to client-side consultants through its paymaster account?


MG Capital will prepare, or cause its paymaster to prepare, sub-fee agreements for all consultants based on the fee split percentages specified in a fee-sharing agreement referenced in the PSA. Consultants who wish to directly effect payment to a referral partner or to further divide their portion of the fees among their affiliates, are responsible for either (1) coordinating an additional sub-fee agreement with MG Capital's paymaster or for (2) designating to MG Capital's paymaster that their allotted fee portion should be paid to their designated sub-paymaster and then filing their own sub-fee agreements with their paymaster.
 
Will MG Capital provide some protection for consultant compensation? 


Yes, but only a little. MG Capital will not make a formal submission of the bond owner’s bond portfolio to the LTN purchase program until the bond owner has signed and notarized the PSA. Having said this, MG Capital has no responsibility for payment of consultant compensation and cannot guarantee the payment of this compensation. Payment of PSA compensation is solely the bond owner’s responsibility and non-payment would be a legal matter between the bond owner and all consultants.

Will the LTN purchase program ensure the payment of PSA compensation to consultants?


No. PSAs with the bond owner are private agreements between consultants and bond owners. The purchase program will (1) pay the agreed upon sale proceeds to the bond owner, (2) pay out the small official commission (which is already 100% taken) and (3) have nothing to do with bond owner compensation to consultants through PSAs. 

What if the bond owner is not willing to compensate either the program-side or the client-side consultants?


In this case, consultants requesting PSA compensation should politely help the bond owner understand that we will not work without compensation and that, if he does not wish to provide our compensation, then we will discontinue the program introduction efforts that we were prepared to make on his behalf.

What is the difference between a Working Consultant and a Referral Partner?


Working Consultants have performed recognizable work in the advancement of an LTN package. One should not expect to be considered a working consultant simply by having a business, employee, affiliate, family or friendship relationship with a consultant who performed the “work.” Working consultants are paid under the structure outlined in the PSA. Referral Partners are parties who provided to a working consultant a name, email address or phone number of a party who might assist in completing a transaction. Referral Partners are compensated by the working consultant to whom they provided their referral. 

Why does MG Capital require a completed and signed Bond Package Summary & Genealogy?


The Bond Package Summary document helps provide MG Capital with information needed to prepare a Profit Share Agreement (PSA) for the Bond Owner to sign. For the available LTN Purchase Program, compensation to MG Capital and all client-side consultants who have not arranged a separate fee agreement with the bond owner is dependent on this PSA. Consequently, MG Capital requires a PSA signed by the Bond Owner before submitting an LTN package to this Purchase Program.

What is the Introducing Consultant designation?


The Introducing Consultant is the consultant who provides the first fully-compliant package to MG Capital for a bond owner which has then been submitted to and registered with the Program Facilitator. After the designation of Introducing Consultant has been granted to a consultant, any additional bonds that bond owner wishes to submit to this purchase program must be done through the services of the designated Introducing Consultant. The Introducing Consultant designation includes all consultants listed on the PSA that is issued when a bond owner is first introduced to the program. All subsequent submissions from that bond owner to that program must reflect the same consultant genealogy.

How does MG Capital handle duplicate introductions of the same bond owner?


MG Capital will begin by working with the first consultant who attempts to introduce a specific bond owner. This potential introduction is initiated by MG Capital’s receipt of a bond owner’s LTN package. If package documents are missing or need to be updated, the original introducing consultant will be given 30 calendar days in which to provide the documents that are missing or outdated so the package meets all submission requirements. During this package-completion time, if another consultant attempts to introduce that same bond owner, that second attempted introduction will not be recognized until the package-completion period is finished. If a second introduction occurs after the 30-calendar-day package-completion time, the first consultant will be notified of the second introduction and will be given 7 calendar days to submit the missing or outdated documents. If the first consultant does not produce a fully compliant LTN package during the 30-calendar-day or 7-calendar-day package-completion period, then the consultant who first presents MG Capital with a fully compliant LTN package from that bond owner will be recognized as the introducer of that bond owner. The designation as the introducer of a bond owner applies to all bonds that may be subsequently transacted by that bond owner through MG Capital. Any additional bonds will only be accepted if submitted through the recognized introducer for that bond owner.