Financial company Umbrella
Product Description
according to the schedule
of interest payments;
Income mechanism
Financial company Umbrella attracts investments to purchase mortgage-backed loan portfolios, and provides investors with a profit and return on the investments by reconciliation of the loan cases.
Compared to the current yield of the Mid-Term US Treasury Bonds of 1.578% per annum, the fixed-income investments offered by Financial company Umbrella have the advantage of high returns (12% per annum) under risk-weighted ratio.
Description of the issuing company and related companies
Issuer
Umbrella Financial Company is a management company of the Umbrella’s Financial Group.
Umbrella Financial Group includes:
- Umbrella Financial Management Company (license delivery order No. 1009 dated June 04th, 2019).
Umbrella Financial Company attracts investments and acquires assets (problem debt portfolios), provides an income from the attracted investments.
Umbrella Management Company builds its activities on the basis of the BPM (Business Process Management) concept, which provides transparency and predictability at all stages of the portfolio and investment management process.
Umbrella uses effective systems:
- Trust and Guarantee Financial Company (DG Finance)
(Certificate of registration No. 435 of November 19, 2013).
Carries out operational activities on collecting bad debts (Debts Recovery Agency).
DG Finance ensures the implementation of all stages of work with debtors, starting from Soft Collection up to the Legal Collection, and also accompanies re-registration of mortgage objects (collaterals) ownership and subsequent sale of this property.
DG Finance means:
12 years of successful work on Ukrainian financial market specializing on debts collection activities;
More than 200 specialists, including 42 lawyers, experts on real estate and work with financial organizations;
4 autonomous call centers;
Experience in ProZorro e-procurement system usage.
Structure of Umbrella Financial Company product portfolio in 2019:
| Loan portfolio | Debt amount on the loan portfolio, USD | Actual portfolio purchase price, USD | Relative debt cost, % |
|---|---|---|---|
| LP 1 | $3 964 600 | $180 850 | 4,5% |
| LP 2 | $4 820 000 | $201 785 | 4,2% |
| LP 3 | $14 748 400 | $283 950 | 2% |
| LP 4 | $9 806 300 | $380 120 | 3,8% |
| Total: | $33 339 300 | $1 046 705 | 3% |
The structure of the total portfolio of Umbrella, 2019, % of the total debt
Total amount of the credit debt under the group of companies managements is 1.2 billion euros.
Umbrella Portfolios Assets return forecast
| Loan portfolio | Actual portfolio purchase price, USD | Planned portfolio income, USD | Planned Portfolio Reconciliation Cost, USD | Planned portfolio income, USD | Planned portfolio income, % |
|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | 6 |
| LP 1 | $180 850 | $384 320 | $76 864 | $307 456 | 70% |
| LP 2 | $201 785 | $403 570 | $80 714 | $322 856 | 60% |
| LP 3 | $283 950 | $553 711 | $110 742 | $442 969 | 56% |
| LP 4 | $380 120 | $788 742 | $157 748 | $630 994 | 66% |
| Total: | $1 046 705 | $2 130 343 | $426 068 | $1 704 275 | 63% |
The structure of the planned total return on portfolios in magagement, %
Actual income (cash-in) from the Portfolios under Umbrella company management
(as of November 01, 2020)
| Loan portfolio | Portfolio Purchase Date | Actual portfolio purchase price, USD | Actual receipt of money on the account on 01.11.2020 | Value of property on balance, USD | Total revenue minus reconciliation costs («4» - 20%) + «5» | Return on investment, % |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| LP 1 | 13.02.2019 | $180 850 | $345 191 | $120 890 | $397 043 | 219,5% |
| LP 2 | 21.02.2019 | $201 785 | $90 502 | $292 213 | $364 615 | 180,7% |
| LP 3 | 18.04.2019 | $283 950 | $142 814 | $106 038 | $220 289 | 77,6% |
| LP 4 | 27.06.2019 | $380 120 | $254 027 | $183 278 | $386 500 | 101,7% |
| Total: | $1 046 705 | $832 534 | $702 419 | $1 368 446 | 130,7% |
Investment risks and their minimization
- Changes in the legislation of Ukraine, which could lead to worsening conditions or the actual inability to continue activities on returning bad debt to the creditors.
To minimize this risk, legal department of the Umbrella Management Company constantly monitors changes in the legislation of Ukraine and develops effective mechanisms to avoid newly formed risks.
On June 3, 2018, Verkhovna Rada of Ukraine adopted the Law on Strengthening the Rights of Creditors (Bill No. 6027-d “On Amending Certain Legislative Acts of Ukraine Regarding the Renewal of Lending”), which “aims to reduce risks for banking institutions and national/foreign investors” (cited by Oschadbank Chairman of the Board Andriy Pyshny).
- Exchange rate risks
The risk of fluctuations in the national currency of Ukraine against the US dollar is taken into account in all business processes of Umbrella company:
- In assessing the investment attractiveness of the Portfolio, the pessimistic long-term IMF forecast of the US dollar against the national currency of Ukraine is used;
- In the cash flow management system.
In 2019, the national currency of Ukraine strengthened against the dollar by 12.5%. The IMF expects that by the end of the year, the dollar will cost an average of 26.75 UAH, but in 2020 it will grow to 27.72 UAH, and in 2021 – to 28.7 UAH. According to the forecasts of the Fund, in 2022 the dollar against the hryvnia will amount to UAH 29.67, in 2023 – UAH 30.64, and in 2024 – UAH 31.61 (https://www.imf.org/en/Publications/ WEO / Issues / 2019/10/01 / world-economic-outlook-october-2019).
The risk of not receiving the planned income (non-return on investments)
To minimize the risk of not receiving the planned income (non-return on investments), Umbrella company uses its balanced scorecard and Portfolio management process monitoring system* (see Annex 1).
| Period | 1st quarter | 2nd quarter | 3rd quarter | 4th quarter | 5th quarter | 6th quarter | 7th quarter | 8th quarter | Total |
|---|---|---|---|---|---|---|---|---|---|
| Dynamics of portfolio income, % of planned revenues for the period of 2 years | 3% | 7% | 8% | 14% | 21% | 20% | 21% | 6% | 100% |
| Investor Payments | 3% | 3% | 3% | 3% | 3% | 3% | 3% | 103% | 124% |
Dynamics of planned revenues by quarters, % of total planned revenues
Umbrella company manages several portfolios simultaneously. The company plans to manage 10 portfolios with a total debt of about $ 150 million in 2020.
There being presence of the Portfolios at different stages of management, this allows the Company to effectively plan cash flow and guarantee timely payments to the investors.
Umbrella Financial Company uses its own funds to invest in the Portfolios / parts of the Portfolios, partially assuming its risks of not receiving planned income.
Umbrella Management Company financial resources structure in 2019
Umbrella Management Company financial resources
as of November 1, 2019:
| Umbrella Resource | Total, $ |
|---|---|
| Own funds | $800 000 |
| Attracted funds | $250 000 |
| Current assets of the company | $100 000 |
| Total | $1 150 000 |
Structure of the financial resources of Umbrella Management Company in %, 2019
| Own funds | 78% |
| Attracted funds (loans) | 22% |
Financial resources structure of the management company Umbrella, November 2019
The development strategy of Umbrella Management Company provides for a significant increase in the share of attracted funds into its financial resources structure.
Planned assets of Umbrella Management Company in 2020:
| Umbrella Resource | Total, $ |
|---|---|
| Own funds | $1 650 000 |
| Attracted funds | $3 250 000 |
| Current assets of the company | $100 000 |
| Total | $5 000 000 |
Structure of the financial resources of Umbrella Management Company in %, 2020
| Own funds | 35% |
| Attracted funds (loans) | 65% |
The structure of financial resources of the management company Umbrella, 2020
The credit portfolio management monitoring system (Balanced scorecard monitoring system) uses Balanced scorecard, which allows to control the return on investment and its profitability.
Each investor receives the personal access to the digital monitoring system (Balanced scorecard monitoring system) and have a possibility to regularly monitor the financial results and one’s Portfolio progress on the settlement business process.
Special conditions for non-residents of Ukraine (see Annex 2)
Attracting investments from non-residents of Ukraine are regulated by the legislation of Ukraine, namely, Resolution No. 6 of January 2, 2019 “On approval of the Regulation on the procedure for banks to provide the National Bank of Ukraine with information on contracts providing for residents to fulfill debt obligations to non-resident creditors on loans and loans attracted by residents,” in accordance with Articles 7, 71, 15, 25, 44, 56 of the Law of Ukraine “The National Bank of Ukraine”, the Law of Ukraine “Banks and Banking”, the Law of Ukraine “Currency and foreign currency transactions.”
Attraction of funds from the clients – non-residents of Ukraine is carried out in a way of obtaining a loan from them (see Loan Agreement for non-resident clients).
Relationships are drawn up by concluding a loan agreement, which includes the following articles:
Loan agreements are developed for each individual investor, based on the agreements reached, the form of the investor ownership, as well as the legislation requirements of the country where the investor has its registration.
According to the Ukrainian law, a resident of Ukraine, paying income to a non-resident in the form of a loan (credit) agreement interest, is required to withhold the interest tax on non-resident income (income from repatriation) from the amount of the interest.
The total tax rate is 15%. The tax rate and procedure for its deduction / payment in Ukraine does not depend on the recipient of income status and applies to legal entities as well as to individuals.
If you have invested $ 500 000 and your income is $ 120 000, in which that case you pay 15% tax for the income amount, namely $ 18 000.
Ukraine may establish a different (lower) tax rate in its international agreements. List of countries with which Ukraine has entered into the double taxation avoidance agreements is given in Annex 2.
To apply the provisions of international double taxation agreements, a resident of Ukraine is required to obtain a certificate from a non-resident recipient of income, confirming his tax agent status in the country of registration.
Annex 1
Business portfolio management
Annex 2
The list of countries with which Ukraine has concluded agreements on avoidance of double taxation.
Agreements came into force
Team
PhD in Economics
PhD in Economics
