Farazad Investments on the role of structured finance in boosting the global economy

Transcript

Farazad Investments provides global access to capital and assistance in obtaining loans for industrial and commercial projects. World Finance speaks to company founder and CEO, Korosh Farazad, to find out about how these activities promote the growth of the global economy.

World Finance: Well Korosh, what role does structured finance play in the current economic climate, and what is Farazad Investments’ approach to this?

Korosh Farazad: Well structured financing basically is a key element of raising capital for various types of sectors and/or arenas in the funding world, and Farazad’s interest in these type of scenarios is basically to make sure that all the components in terms of a transaction is well prepared by the potential entity that wants to borrow, and we put those all into one package and present it to our institutional investors and/or private equity financiers.

World Finance: Well what services do you offer, and how do you tailor these products to your clients’ needs?

Korosh Farazad: Well in terms of tailoring, it’s case by case. There’s various types of scenarios or components that go into one deal that allows the transaction to be successfully funded. There is structured financing, there is conventional debts, and then you have your bonds funding in terms of rating bonds and then selling it into the market through the institutions which they will then go ahead and sell to their investors within their institution. It’s quite straightforward if you take the deals and understand what the client’s requirements are, and then implement a structure that would be tailor-made for the purpose of that transaction.

[W]e’ve managed to maintain a structure that complies with the regulations of whatever country we may be financing

World Finance: Well Farazad Investments is very well situated across five continents, so what advantage is this in terms of investment knowledge?

Korosh Farazad: You have to definitely have the knowledge in order to proceed into maintaining different cultures, different criteria, different compliances, regulations, etc, and having the know-how to adapt to those various cultures in terms of the regulations, compliance procedures, the knowledge within the ground and having the local sponsors to assist on those scenarios, it provides us with the comfort, and it provides the other side the comfort that we have the ability to finance the transactions in a successful manner. There is no transaction that is a perfect transaction, and it has to go through procedures in order for us to get to the end goal, which is to finance the deal and have our institutional investors and our private equity partners to feel comfortable that their capital will be preserved and they would make a return on their investment.

World Finance: Well obviously a lot of companies like Farazad Investments were hit quite hard by the global financial crisis. However, you’ve seen progressive growth, so what do you think your key to success would be?

Korosh Farazad: There has been a lot of problems. Throughout the financial crisis a lot of entities, both the private equity funds and the institutional front were hit hard, and the banks have now recently unstitched their pockets in terms of lending. The criteria are still the same, the capacity is still the same. In terms of compliance regulations, they’re making sure that all the components are in place. We’ve been fortunate to have the right partners in place, and that means we have our own preferred institutional lenders, and the private equity partners that we work with do know us. They know that we follow very strict criteria in terms of doing a provisional underwriting, if you wish to call it, and gathering the material, making sure that the information makes sense before we present it to the institution and/or the private equity investors. Even during the economic crisis, there was still an appetite to finance transactions, whether it was a combination of private equity and/or debts, or one or the other, but if there was not enough components in the transaction and if the borrower did not provide sufficient contribution to the deal, it would make it challenging. So we implemented a structure that we wanted to make sure that the borrower has some form of contribution, whether it’s 10, 20, 30 percent of the deal as a contribution in terms of either first charges on the assets, or in terms of cash. Once that was confirmed, then it made it easier for us to find the right partner to finance the deal.

We are seeing a lot of interest in terms of bond financing, whether they’re Sukuk bonds, which are the Islamic way of doing Sharia compliant bonds

World Finance: Well looking at regulatory compliance, and what impact has this had on your business?

Korosh Farazad: It definitely has impacted the business, and that’s because of the fact that there has been so many new reforms made in the financing world, especially again after the 2008/9 crisis. In some cases the new regulations have caused transactions to fail, but we’ve managed to maintain a structure that complies with the regulations of whatever country we may be financing, or that particular jurisdiction, and at the same time it allows comfort for again the institution and/or private equity financiers, lenders, to accelerate their interest in financing the deal.

World Finance: Well looking to the future now finally, and what major tends or developments do you think are going to influence investments over the next 12 months?

Korosh Farazad: We are seeing a lot of interest in terms of bond financing, whether they’re Sukuk bonds, which are the Islamic way of doing Sharia compliant bonds, we are beginning to see a lot of interest in that arena. We are also seeing more interest in rated bonds. The company is obviously a revenue-generating entity, and they get one of the top majors, like your Standard & Poors, your Moodys, your Fitches, to come in and rate or grade their company in order to attract more investments, and we are seeing that happen. On the other hand we are also seeing a lot of conventional funding taking place, but the conventional funding is a two part structure. One, in order for us to finance a deal, we want to make sure that the client does have enough capacity in terms of cash reserves, so then we can do an entire package of two parts, one part being providing project financing for that particular transaction, and establishing private banking and relationships.

World Finance: Korosh, thank you.