The Bemo Repo Model 1.1. Repo Assets 1.1.1. WHAT IT IS

BEMO BUSINESS MODEL
1. THE BEMO REPO MODEL

1.1. REPO ASSETS
1.1.1. WHAT IT IS:
A repurchase agreement is the sale of an asset combined with an agreement to
repurchase the same asset at a higher price at a future date. It is also referred to as a
"repo."
1.1.2. HOW IT WORSKS/EXAMPLE:
For example, party A may sell a specific asset to party B for a set price and agree to
buy back the asset for a specified amount at a later date. In actuality, however,
the sale is not a real sale, but rather a loan, secured by the asset. As with
collateralized loans, the asset being used as collateral is "held" by party B (in case
party A defaults and does not repay the amount to party A.) The incremental
amount to be repaid by party A to repurchase the asset is the amount of "interest"
earned on the loan by party B.
2. PROPERTY HOLDERS
A property holder is an entity which owns an asset that qualifies under the CRAB
(described in paragraph 3 below). In this context, an entity is taken to be:
A company registered under the Companies Act
An NGO (registered)
An individual real person
A Church
Government department or Ministry
Municipality etc.
3. CRAB
CRAB stands for Collaterised REPO Asset Base. The following are qualifying
assets under CRAB
Residential property
Motor vehicle (not more than 5 years since date of manufacture)
Residential stand (with title deeds)
Commercial property
Commercial stands
Warehouses
Government Treasury Bills
Zero Coupon Bonds
Corporate bonds
Listed Equities
Private equities
4. STEPS IN LIQUIDATING AN ASSET USING REPO
I.
Property holder is in need of finance. He has a property worth $200,000
for instance. He does not wish to sell the property permanently, but instead
want to raise finance for his business using the property as collateral. The
property holder determines that his business venture is in need of say
II.
$40,000.00. Property holder approaches BEMO.

BEMO evaluates the property holder using the basic CANONS of lending.
The property holder is given credit rating. The credit rating determines the
level of finance and pricing of the facility. Property holder is either
III.
approved or disapproved. If client is approved, proceed to step 3.

A REPO (Repurchase agreement) is signed between BEMO and the
Property owner specifying the terms and conditions including selling
IV.
price, re-purchase price and tenure.

Simultaneously with step 3, title deeds are received from the Property
Holder and bonds are registered against the property with the Deeds
V.
VI.
VII.
Registry Office.
Property is paid the REPO selling price.
At maturity, the Property holder pay BEMO the Re-Purchase price.
In the event of default, BEMO will auction the property to recover the RePurchase price or any outstanding balance, the remainder of which will be
paid out to the property owner.
5. DEALING WITH FINANCIERS

BEMO shall maintain a pool of collateralized assets. The assets shall be in the form
of REPOs backed by real estate properties and other qualifying assets. The collection
of the collateralized assets shall be called the CRAB = Collaterised REPO Asset
Base. BEMO will raise finance by securing lines of credit and bonds secured by the
CRAB.
Fund level = A% of CRAB
A% is the security to loan ratio that Brance Capital shall determine from time to time
taking into account the following:
Quality of assets in the CRAB

Tenure of securities used to raise funding
General economic fundamentals driving interest, inflation etc.
The financials risks inherent in the transactions
The Board of Brance capital shall set a ceiling to A% and this ratio must be reviewed
periodically.
6. RISKS
6.1. FINANCIAL RISKS
6.1.1. Credit Risk
6.1.2. Interest Rate Risk
6.1.3. Exchange Rate Risk
6.1.4. Liquidity Risk
6.2. NON-FINANCIAL RISKS
6.2.1. Strategic Risk
6.2.2. Operational Risk
6.2.3. Reputation Risk
6.2.4. Compliance Risk
7. RESOURCES
7.1. INFRASTRUCTURE
It is important for the business to create an elegant office ambiance in order to stimulate
confidence amongst investors and business partners.
7.2. HUMAN RESOURCES AND SPECIAL SKILLS
The business can be run with minimal staff. The following staff members are a requisite:
General Manager
Special Skill real estate valuation expert
Accountant
Marketing and Public Relations Executive
Sales Staff
General Hand
Specialized skills in the field of real estate, financial economics and structured finance
will have to be recruited to oversee the business. It is important to note that this field of
business relies extremely on the expertise of its human resources. A single individual with
adequate skills suffices.
8. BUDGET
A total of $350,000 is needed to set up the business. The breakdown of this budget is as
follows:
9. SOURCES OF FINANCE
Both equity and debt capital will be employed in order to boost the business.
Shareholders
$ 150,000.00
Debt Capital
$200,000.00
Total
$ 350,000.00

The Bemo Repo Model 1.1. Repo Assets 1.1.1. WHAT IT IS

Uploaded by

Copyright:

Available Formats

The Bemo Repo Model 1.1. Repo Assets 1.1.1. WHAT IT IS

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Bemo Repo Model 1.1. Repo Assets 1.1.1. WHAT IT IS

Uploaded by

Copyright:

Available Formats

BEMO BUSINESS MODEL

1. THE BEMO REPO MODEL

$40,000.00. Property holder approaches BEMO.

approved or disapproved. If client is approved, proceed to step 3.

price, re-purchase price and tenure.

5. DEALING WITH FINANCIERS

Quality of assets in the CRAB

You might also like