I've done some calculations using my financial calculator. Based on 2083 a month (500,000 total in 20 years), @ 6% Annual percentage rate, this has a Net Present Value of $292,200. Maybe they want more than 6% which would reduce the Net Present Value. Anyhow, I can see how Derivex get a figure in the vicinity of $200,000.
Based on Trevor Cohens figures that this sum would result in a cash figure of $200,000. Assuming this would earn interest at 6% per annum in a CMT paid monthly and the $200,000 would be paid at the end of 20 years, on a zero per cent annual percentage rate this would have a Net Present Value of $440,000.00
Trevor suggests someone will lend $450,000 based on $200,000 and its earnings. And that in the 3rd phase someone will lend $950,000 for the income stream on the $450,000
I'm happy to assume Trevor Cohen hasn't disclosed his exact figures so people won't duplicate them or possibly identify his sources of finance.
However, if there are up to 3 separate fundraisings to get to the position where the loan is available there seems to be a situation where the first lenders/investors want a return on their money and the second and third want a return of capital only without any premium for risk (eg foreign exchange risk) or duration risk.
So I suppose in my naivety I'm wondering why they don't just deal with the lenders of the second and third tranches. Of course if the $1.6 million bonds are part of one transaction where the investor is getting guaranteed the return of his funds, with the possibility of greater gains on a small part, that might be understandable after all there are investments available like that for retail investors.
I will be very pleased when Derivex get the OK from ASIC and I use a computer or drive a car without needing to know how they work.
I'm exposing my workings in the knowledge that they may indicate I don't know how to use a financial calculator or I have misunderstood something in Derivex's posting on the earlier thread which I have copied on here to save people having to look it up:
"To explain in traditional terms ...
We secure the principal repayments and conduit payment initially in local CMT deposits earning risk free rate equivalent to 90 day BBSW - we do not invest in 90 day BB's this is detailed only as an equivalence measure - we securitise
the income stream earned from the CMT deposit account only.
EG $500,000 loan over 20 years.
The repayments on hand increase from $ 25,000 conduit + $2083 per month over 20 years on an accrual basis so the maximum capital that can be gained from this step is approx $200,000 dependant on loan term and floating rate earned in CMT account after discount value is applied.
Step 1 injects new capital at cost only of the securitised CMT receivable.
Our funding deed precludes us from onlending funds, or accessing core capital repayments they remain secured on deposit.
Step 2 the capital raising from step 1 is placed on deposit in same way but this time lump sum $200,000 is secured in CMT and the process is repeated.
The capital base of $200,000 remains on deposit securing CMT income generation and will provide capital raising of approx $450,000
Step 3 is repeat of process above generating $950,000 - $500,000 allocated for property settlement and balance of $450,000 deposited as cash reserve in CMT account. The earnings on the cash reserve are our profits.
Total raising $1,600,000
Core capital - Conduit and principal repayments in CMT to secure earnings
Funds allocation - $200,000 in CMT to secure CMT earnings
- $450,000 in CMT to secure CMT earnings
Last $950,000 capital raising pass
- $500,000 to settle property
- $450,000 in CMT to secure CMT earnings that form our
residual profit source
Total of $1.1 million sitting secured in CMT
The step process explanation is used only to explain how it is possible to step an accruing sum to get a desired capital raising target. The loan is secured with a standard mortgage and the indiviual holds title subject to that charge. We do not securitise on an MBS or ABS basis BUT ONLY against CMT earnings the property cannot be lollateralised within the terms of our funding deeds.
We utilise proprietary software that will take into account current CMT earn rate on a floating basis and projects the same result ie need factor of 3.2 times the sum needed for property loan of $500,000. Hence need to issue $1,600,000 of residiual income bonds to achieve.
The bond issues are done over the top of a pool of loan obligations not an individual basis.
Perhaps stop here and discuss to this stage ..... ????'s"
