Collaterised Asset Backed Note (CABN)

1. How is Credit Risk Mitigated?

CABN mitigates the Lenders credit risk as result of collateral assets provided borrower, which are highly liquid, asset such as Treasury bills.  The Lender can also refinance during the life of a CABN by selling or repoing the  assets to a third party (he would, of course, subsequently have to  buy the same type of collateral back in order to return  it to  his repo counterparty  at the  end of the  repo). This  right of use  therefore mitigates  the liquidity risk that  the buyer takes  by lending to the  seller. Because lending  through a repo exposes  the buyer to lower credit and liquidity risk, repo rates should be lower than unsecured money market.

e-Link Markets will at no time receive cash directly from a Lender and will not conduct investments on behalf of an Lender except the investor signs a waiver that authorises e-Link markets to trade on its behalf.  Each Lender is setup on our trading platform and receives login credentials to directly access our trading platform and trade and negotiate amounts, rates and tenor of investment with borrowing counterparties.

2. What are the benefits of REPO to the Lender?

  1. Allow The Lender to earn Interest Income from its excess liquidity with reduced exposure to the Credit risk of The Borrower. This is mitigated or replaced with the credit risk of the collateral asset that has been used to secure the borrowing. In the case of T-Bills. it is the credit risk of The Federal Govt. of Nigeria. Thereby the Lender is allowed to earn Interest Income from its excess liquidity with reduced exposure to the credit risk of The Borrower.
  2. The Total Liquid Assets of the Lender is not reduced or compromised.  Due to fact that the REPO transactions are liquid money market investments and do not exceed a maximum tenor of 1 year.
  3. The Lender receives Treasury bills or other Liquid assets which are accounted for as off- balance sheet assets, and as such do not increase the T-Bill holdings of the Lender

3. What are the benefits of REPO to the Borrower?

  1. Allow deficit Borrowers that require liquidity to borrow funds from surplus Lenders safely.
  2. Allow Borrowers to earn 2 income opportunities from one single investment in T bills. While the Borrower's T-bills are REPO-ED out to the Lender. It continues to earn Interest income from T-Bills and simultaneously earns Interest Income from additional Risk Assets that have been created from borrowed funds.  Thereby there is a potential for The Borrower to earn more net income from the REPO transactions depending on if it is able to obtain favorable borrowing rates from the market.
  3. Allow the borrower to derive liquidity benefits from its collateral assets.
  4. Allow the Borrower to expand its Total T-Bill Assets, Risks Assets and Total Assets much faster when compared to non  leveraged Borrowers that do not participate in REPO transactions
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