System and method for credit enhancing a debt issuance and creating a present value investable arbitrage

A method for structured finance, the method comprising:

• forming an investment platform by an entity, using a computer or computer network, wherein at least one different entity participates in an online auction system that includes a netting system with an algorithm engine in order to calculate a make-whole algorithm calculation that matches bids, maturities, payouts, and yields, to determine and generate a hedge for credit enhancement;
• wherein said make-whole algorithm calculation yields a payment in excess of par for a plurality of benchmark rate fluctuation outcomes;
• wherein any declines in benchmark rates have an inverse action on the yield of at least one debt instrument included in a qualified financial contract that secures a certain portion of a future income stream discounted to a present value regardless of the market interest rate environment;
• capitalizing said entity with debt and equity investments of said at least one different entity;
• issuing, by said at least one different entity, through said investment platform, of at least one debenture that qualifies as a derivative debt security and/or a qualified financial contract that includes a contractual make-whole provision;
• wherein any event of payment default by said at least one different entity would constitute a pre-payment that would trigger an offset payment between said at least one debenture of said entity included in said qualified financial contract and said at least one debt instrument of said at least one different entity included in said qualified financial contract to said at least one different entity;
• purchasing, by said entity of at least one debt instrument issued by said at least one different entity;
• buying and selling in said online auction system, between at least two or more entities using said computer or computer network;
• accessing a database of an auction management system, by said at least two or more entities, using said computer or computer network;
• issuing, by said at least one different entity, a bid for said at least one debenture included in said qualified debt derivative and/or said qualified financial contract wherein said bid is logged into the database of said auction management system and wherein a credit rating for said at least one debenture is calculated by said auction management system using said computer or computer network;
• comparing of other bid securities in the auction environment, by said auction management system, wherein said netting system matches different bids, maturities, payouts, and yields to determine and generate a hedge for credit enhancement including a matching mutuality of debt offset that allows for repayment of an investment;
• calculating by said auction management system, of a bid on said qualified debt derivative and/or said qualified financial contract, in order to determine a fair market yield on the security using said computer or computer network;
• calculations of the make-whole amount are calculated by the make-whole algorithm using said computer or computer network;
• wherein a financial guarantee is provided by an external independent entity in order to credit enhance said at least one debenture included in said qualified debt derivative or said qualified financial contract issued results, and wherein said financial guarantee provided results in an investment grade rating for said debenture issued;
• generating pricing for said hedge generated for credit enhancement wherein said pricing generated is utilized by said netting system to secure said external independent entity to provide said credit enhancement;
• said credit enhancement partner wraps the debt security with external said credit enhancement;
• generating, by said netting system, of matching buy-sell order transactions that are settled by a clearing agent;
• updating, using said computer or computer network, of successful bid pricing on the databases of said netting system and said auction management system.