In the event that BS&T stops payments or changes its terms and conditions so that the intended pass through of interest is either stopped, pays lower interest or at a schedule that does not align with PPT bonds, PPT reserves the right to buy back the currently issued bonds by paying the coupon (currently 1% per day, accrued, simple interest) to current holders.
2. In the event that interest payments from BST is below your expectations then PPT can buyback the bonds at 1% per day on the initial bond listing price of 1.00 BTC per bond.
The wording was intended to be tighter than simply "below expectations". It is to cover the event where Pirate stops and winds up the whole thing, or changes the interest rate scheme materially so that we cannot pass through the intended 1%/day rate. It does not give us the right to issue the bonds on day 1 at a premium and then immediately buy them back.
Well defaulting is probably taken into account by everyone's risk appetite.
But this thing of early buyout will drag the bond price down during bond auction and also later on secondary market as the probability of change in the conditions of BS&T is high. What about changing it to p*(1+0.01x)/1.28 instead of 1+0.01x where p is the average price in the auction and x number of days since auction. I understand that this would push you to invest more than 1BTC per bond sold into BS&T which I guess wasn't originaly intended. Take it as suggestion that might bring auction prices higher and thus increase your profit.
buy back price = p*(1+0.01*x)/1.28,
where p is 1.00 and x is 0
In the event of BST changing the interest rates lower that triggers the event, the bond buy back price would be:
1.00 * (1 + 0.01*0 ) / 1.28 = 0.78125
Am I missing something here? This will always have the effect of lowering the bond price because in the case of a drop in the BST the bonds will be called at the p*(1+0.01*x)/1.28 buy back price and the bondholder will always lose money on the bond.
You think 1+0.01x would keep the bond price low, p*(1+0.01x)/1.28 is even lower.
Here is a whole table. The buy back price is in the matrix for its respective p and x value.
#done in R
# p*(1+0.01*x)/1.28
# p is the average price of bonds sold at issuance
# x is the number of days from issuance
p <- matrix(seq(from=1.00, to=1.28, by=0.01),ncol=1)
x <- matrix(0:28,nrow=1)
z <- p%*%(1+0.01*x)/1.28
colnames(z)<-x # x as column names
rownames(z)<-p # p as row names
z
0 1 2 3 4 5 6 7 8 9 10 11 12 13
1 0.7812500 0.7890625 0.7968750 0.8046875 0.812500 0.8203125 0.8281250 0.8359375 0.8437500 0.8515625 0.8593750 0.8671875 0.87500 0.8828125
1.01 0.7890625 0.7969531 0.8048437 0.8127344 0.820625 0.8285156 0.8364063 0.8442969 0.8521875 0.8600781 0.8679688 0.8758594 0.88375 0.8916406
1.02 0.7968750 0.8048437 0.8128125 0.8207813 0.828750 0.8367188 0.8446875 0.8526563 0.8606250 0.8685938 0.8765625 0.8845313 0.89250 0.9004687
1.03 0.8046875 0.8127344 0.8207813 0.8288281 0.836875 0.8449219 0.8529688 0.8610156 0.8690625 0.8771094 0.8851563 0.8932031 0.90125 0.9092969
1.04 0.8125000 0.8206250 0.8287500 0.8368750 0.845000 0.8531250 0.8612500 0.8693750 0.8775000 0.8856250 0.8937500 0.9018750 0.91000 0.9181250
1.05 0.8203125 0.8285156 0.8367188 0.8449219 0.853125 0.8613281 0.8695313 0.8777344 0.8859375 0.8941406 0.9023438 0.9105469 0.91875 0.9269531
1.06 0.8281250 0.8364063 0.8446875 0.8529688 0.861250 0.8695313 0.8778125 0.8860938 0.8943750 0.9026563 0.9109375 0.9192188 0.92750 0.9357813
1.07 0.8359375 0.8442969 0.8526563 0.8610156 0.869375 0.8777344 0.8860938 0.8944531 0.9028125 0.9111719 0.9195313 0.9278906 0.93625 0.9446094
1.08 0.8437500 0.8521875 0.8606250 0.8690625 0.877500 0.8859375 0.8943750 0.9028125 0.9112500 0.9196875 0.9281250 0.9365625 0.94500 0.9534375
1.09 0.8515625 0.8600781 0.8685938 0.8771094 0.885625 0.8941406 0.9026563 0.9111719 0.9196875 0.9282031 0.9367188 0.9452344 0.95375 0.9622656
1.1 0.8593750 0.8679688 0.8765625 0.8851563 0.893750 0.9023438 0.9109375 0.9195313 0.9281250 0.9367188 0.9453125 0.9539063 0.96250 0.9710937
1.11 0.8671875 0.8758594 0.8845313 0.8932031 0.901875 0.9105469 0.9192188 0.9278906 0.9365625 0.9452344 0.9539063 0.9625781 0.97125 0.9799219
1.12 0.8750000 0.8837500 0.8925000 0.9012500 0.910000 0.9187500 0.9275000 0.9362500 0.9450000 0.9537500 0.9625000 0.9712500 0.98000 0.9887500
1.13 0.8828125 0.8916406 0.9004687 0.9092969 0.918125 0.9269531 0.9357813 0.9446094 0.9534375 0.9622656 0.9710937 0.9799219 0.98875 0.9975781
1.14 0.8906250 0.8995313 0.9084375 0.9173438 0.926250 0.9351563 0.9440625 0.9529688 0.9618750 0.9707813 0.9796875 0.9885938 0.99750 1.0064062
1.15 0.8984375 0.9074219 0.9164062 0.9253906 0.934375 0.9433594 0.9523437 0.9613281 0.9703125 0.9792969 0.9882812 0.9972656 1.00625 1.0152344
1.16 0.9062500 0.9153125 0.9243750 0.9334375 0.942500 0.9515625 0.9606250 0.9696875 0.9787500 0.9878125 0.9968750 1.0059375 1.01500 1.0240625
1.17 0.9140625 0.9232031 0.9323438 0.9414844 0.950625 0.9597656 0.9689062 0.9780469 0.9871875 0.9963281 1.0054687 1.0146094 1.02375 1.0328906
1.18 0.9218750 0.9310937 0.9403125 0.9495313 0.958750 0.9679687 0.9771875 0.9864062 0.9956250 1.0048438 1.0140625 1.0232813 1.03250 1.0417187
1.19 0.9296875 0.9389844 0.9482812 0.9575781 0.966875 0.9761719 0.9854688 0.9947656 1.0040625 1.0133594 1.0226562 1.0319531 1.04125 1.0505469
1.2 0.9375000 0.9468750 0.9562500 0.9656250 0.975000 0.9843750 0.9937500 1.0031250 1.0125000 1.0218750 1.0312500 1.0406250 1.05000 1.0593750
1.21 0.9453125 0.9547656 0.9642187 0.9736719 0.983125 0.9925781 1.0020312 1.0114844 1.0209375 1.0303906 1.0398437 1.0492969 1.05875 1.0682031
1.22 0.9531250 0.9626562 0.9721875 0.9817187 0.991250 1.0007812 1.0103125 1.0198438 1.0293750 1.0389063 1.0484375 1.0579688 1.06750 1.0770312
1.23 0.9609375 0.9705469 0.9801562 0.9897656 0.999375 1.0089844 1.0185937 1.0282031 1.0378125 1.0474219 1.0570312 1.0666406 1.07625 1.0858594
1.24 0.9687500 0.9784375 0.9881250 0.9978125 1.007500 1.0171875 1.0268750 1.0365625 1.0462500 1.0559375 1.0656250 1.0753125 1.08500 1.0946875
1.25 0.9765625 0.9863281 0.9960937 1.0058594 1.015625 1.0253906 1.0351563 1.0449219 1.0546875 1.0644531 1.0742188 1.0839844 1.09375 1.1035156
1.26 0.9843750 0.9942187 1.0040625 1.0139063 1.023750 1.0335938 1.0434375 1.0532812 1.0631250 1.0729688 1.0828125 1.0926563 1.10250 1.1123437
1.27 0.9921875 1.0021094 1.0120313 1.0219531 1.031875 1.0417969 1.0517188 1.0616406 1.0715625 1.0814844 1.0914063 1.1013281 1.11125 1.1211719
1.28 1.0000000 1.0100000 1.0200000 1.0300000 1.040000 1.0500000 1.0600000 1.0700000 1.0800000 1.0900000 1.1000000 1.1100000 1.12000 1.1300000
14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
1 0.8906250 0.8984375 0.9062500 0.9140625 0.9218750 0.9296875 0.937500 0.9453125 0.9531250 0.9609375 0.9687500 0.9765625 0.9843750 0.9921875 1.00
1.01 0.8995313 0.9074219 0.9153125 0.9232031 0.9310937 0.9389844 0.946875 0.9547656 0.9626562 0.9705469 0.9784375 0.9863281 0.9942187 1.0021094 1.01
1.02 0.9084375 0.9164062 0.9243750 0.9323438 0.9403125 0.9482812 0.956250 0.9642187 0.9721875 0.9801562 0.9881250 0.9960937 1.0040625 1.0120313 1.02
1.03 0.9173438 0.9253906 0.9334375 0.9414844 0.9495313 0.9575781 0.965625 0.9736719 0.9817187 0.9897656 0.9978125 1.0058594 1.0139063 1.0219531 1.03
1.04 0.9262500 0.9343750 0.9425000 0.9506250 0.9587500 0.9668750 0.975000 0.9831250 0.9912500 0.9993750 1.0075000 1.0156250 1.0237500 1.0318750 1.04
1.05 0.9351563 0.9433594 0.9515625 0.9597656 0.9679687 0.9761719 0.984375 0.9925781 1.0007812 1.0089844 1.0171875 1.0253906 1.0335938 1.0417969 1.05
1.06 0.9440625 0.9523437 0.9606250 0.9689062 0.9771875 0.9854688 0.993750 1.0020312 1.0103125 1.0185937 1.0268750 1.0351563 1.0434375 1.0517188 1.06
1.07 0.9529688 0.9613281 0.9696875 0.9780469 0.9864062 0.9947656 1.003125 1.0114844 1.0198438 1.0282031 1.0365625 1.0449219 1.0532812 1.0616406 1.07
1.08 0.9618750 0.9703125 0.9787500 0.9871875 0.9956250 1.0040625 1.012500 1.0209375 1.0293750 1.0378125 1.0462500 1.0546875 1.0631250 1.0715625 1.08
1.09 0.9707813 0.9792969 0.9878125 0.9963281 1.0048438 1.0133594 1.021875 1.0303906 1.0389063 1.0474219 1.0559375 1.0644531 1.0729688 1.0814844 1.09
1.1 0.9796875 0.9882812 0.9968750 1.0054687 1.0140625 1.0226562 1.031250 1.0398437 1.0484375 1.0570312 1.0656250 1.0742188 1.0828125 1.0914063 1.10
1.11 0.9885938 0.9972656 1.0059375 1.0146094 1.0232813 1.0319531 1.040625 1.0492969 1.0579688 1.0666406 1.0753125 1.0839844 1.0926563 1.1013281 1.11
1.12 0.9975000 1.0062500 1.0150000 1.0237500 1.0325000 1.0412500 1.050000 1.0587500 1.0675000 1.0762500 1.0850000 1.0937500 1.1025000 1.1112500 1.12
1.13 1.0064062 1.0152344 1.0240625 1.0328906 1.0417187 1.0505469 1.059375 1.0682031 1.0770312 1.0858594 1.0946875 1.1035156 1.1123437 1.1211719 1.13
1.14 1.0153125 1.0242187 1.0331250 1.0420312 1.0509375 1.0598437 1.068750 1.0776563 1.0865625 1.0954687 1.1043750 1.1132813 1.1221875 1.1310938 1.14
1.15 1.0242187 1.0332031 1.0421875 1.0511719 1.0601562 1.0691406 1.078125 1.0871094 1.0960937 1.1050781 1.1140625 1.1230469 1.1320312 1.1410156 1.15
1.16 1.0331250 1.0421875 1.0512500 1.0603125 1.0693750 1.0784375 1.087500 1.0965625 1.1056250 1.1146875 1.1237500 1.1328125 1.1418750 1.1509375 1.16
1.17 1.0420312 1.0511719 1.0603125 1.0694531 1.0785937 1.0877344 1.096875 1.1060156 1.1151562 1.1242969 1.1334375 1.1425781 1.1517187 1.1608594 1.17
1.18 1.0509375 1.0601562 1.0693750 1.0785937 1.0878125 1.0970312 1.106250 1.1154688 1.1246875 1.1339062 1.1431250 1.1523437 1.1615625 1.1707812 1.18
1.19 1.0598437 1.0691406 1.0784375 1.0877344 1.0970312 1.1063281 1.115625 1.1249219 1.1342188 1.1435156 1.1528125 1.1621094 1.1714062 1.1807031 1.19
1.2 1.0687500 1.0781250 1.0875000 1.0968750 1.1062500 1.1156250 1.125000 1.1343750 1.1437500 1.1531250 1.1625000 1.1718750 1.1812500 1.1906250 1.20
1.21 1.0776563 1.0871094 1.0965625 1.1060156 1.1154688 1.1249219 1.134375 1.1438281 1.1532813 1.1627344 1.1721875 1.1816406 1.1910937 1.2005469 1.21
1.22 1.0865625 1.0960937 1.1056250 1.1151562 1.1246875 1.1342188 1.143750 1.1532813 1.1628125 1.1723438 1.1818750 1.1914062 1.2009375 1.2104687 1.22
1.23 1.0954687 1.1050781 1.1146875 1.1242969 1.1339062 1.1435156 1.153125 1.1627344 1.1723438 1.1819531 1.1915625 1.2011719 1.2107812 1.2203906 1.23
1.24 1.1043750 1.1140625 1.1237500 1.1334375 1.1431250 1.1528125 1.162500 1.1721875 1.1818750 1.1915625 1.2012500 1.2109375 1.2206250 1.2303125 1.24
1.25 1.1132813 1.1230469 1.1328125 1.1425781 1.1523437 1.1621094 1.171875 1.1816406 1.1914062 1.2011719 1.2109375 1.2207031 1.2304688 1.2402344 1.25
1.26 1.1221875 1.1320312 1.1418750 1.1517187 1.1615625 1.1714062 1.181250 1.1910937 1.2009375 1.2107812 1.2206250 1.2304688 1.2403125 1.2501563 1.26
1.27 1.1310938 1.1410156 1.1509375 1.1608594 1.1707812 1.1807031 1.190625 1.2005469 1.2104687 1.2203906 1.2303125 1.2402344 1.2501563 1.2600781 1.27
1.28 1.1400000 1.1500000 1.1600000 1.1700000 1.1800000 1.1900000 1.200000 1.2100000 1.2200000 1.2300000 1.2400000 1.2500000 1.2600000 1.2700000 1.28
What would increase the price of the bonds at issuance and thus lower the return to bondholders is if the issuers took on more risk. The higher the risk then the higher the potential return should be. The issuers would need to guarantee the daily 0.01 increase in par value up to 1.28 BTC. If there is a lowering of interest rates by BST then the loss of value by the PPT team would have to be made up with the insurance deposits that PPT keeps.
Other than that I think the current plan is sound.
