Medium term notes are used to raise working capital and to
improve a company’s balance sheet. Private trading programs are quite popular
and banking instruments are popular trading tools. Private trading programs are
an investment generating option for individuals and corporates alike, though
not many have adequate funds to gain entry into such programs. On the other
hand, MTNs could be acquired for larger values at discount and then used in
private placement programs, says Matthew Roddan of Project Ninety Nine.
Why are MTNs in demand for PPP or Private Placement Programs
as they’re called? MTNs have been around since late nineties, with amounts as
less as $10 – a billion, with the current highest values crossing $75 billions!
There are more than 6500 private trade programs and even big corporations like
Harley Davidson, Sony Capital and LG have offered MTNs collateralizing their
assets for development or expansion.
Individual investors, hedge funds and portfolio managers
prefer private trading programs and play by the rules, where most of their
funds are invested in one or more variants of private trading programs, says Matthew
Roddan of Project Ninety Nine. However not many individuals have large sums
and many investors are lured by middlemen who take advantage of their ignorance
and exploit them into giving up their funds for nothing using fraud or scams.
On the other hand, there are real platforms like Project Ninety Nine where
investors can pool their funds and get placed in a genuine private placement
program and earn profits, which is otherwise impossible when done individually.
MTNs come in handy as they can be purchased for a discount,
so one can get an instrument worth 100 million for 10 million or less. Then, it
could be invested in PPPs for the duration (medium term) the instrument is
valid (1 – 99 years). As for firms, PPPs
are a way to improve their financial credentials and raise capital. Without
MTNs many wouldn’t have a shot at these programs, owing to the high investment
required. MTNs are a way to invest in PPPs, though not many know how they work.
It is important to understand that MTN buyers do have rights
and should request for POF before buying the instrument. If a potential seller
refuses or show POF (Proof of Funds), stay clear from them. Remember MT103/23,
MT799/999, MT760, etc. are a type of POFs and there’s no way they can avoid
showing the POF.
Do you know as a buyer you have a right to see CUSIP / ISIN
of the instrument you are buying?
In most cases, you are talking to a broker or middleman who
claims to be a seller’s mandate, but you must understand there could be more
than just this person and it could be a long chain before the direct seller or
buyer is connected. Always ask how many people are involved before proceeding.
No trading platforms communicate with the end party before
requirements are met and anyone claiming otherwise is not to be trusted.
While PPPs or Private Trading Programs or Private Placement
Programs are real, it is important to identify the right contacts and resources
to get through and make money through these programs. Of you wish to avoid
fraud and scams tread carefully.
By Matthew Roddan