Synopsis of In3’s Completion Assurance Program™ (CAP)

Dear Project Developer,

Here is a synopsis for 2024 of In3’s offer to fund middle-market projects or portfolios totaling $25 million or more ($50m+ preferred), located almost anywhere, in any sector at any stage of readiness:

• In3’s flagship Investment Program is based on the ability of the Project Developer/Sponsor to facilitate a financial “Completion Assurance” Guarantee (CAG) mainly to screen out fraud, in favor of our in-house capital partner, a private, US-based family office.  In turn, our partner covers the costs of any remaining development work as well as building and commissioning your project without up-front fees or the need for control.  Generally, once the Project reaches commercial operation date (just before starting to generate revenue), the guarantee goes away – it is allowed to expire.
• A new CAP funding option for 2024 includes the ability to accept 25%+ cash security deposit in lieu of a guarantee.  Though cash is not required (a CAG is usually backed by assets or a balance sheet, not cash), when cash can be used, the deposit is returned in lump sum upon the final draw of invested proceeds.  

Completion security or a CAG protects both parties’ interests, and is similar to a completion bond or performance bond provided by contractors, but is also distinct as it is NOT an insurance product.

We finance projects at these advantageous terms:

• Speed – we complete our due diligence and offer binding terms to reliably reach financial closing within 30 days.  First draw of funding within 30-45 days.
• Flexible and competitive financial terms:
  • CAP funding can be used to cover costs of any remaining Project Development ahead of construction – projects do not need to be entirely shovel-ready
  • Up to 100% of required funding without having to give up control.  Investor seeks minority financial carried interest, and not a majority of the voting rights.
  • New for 2024:  Equity only.  Interest rates have become a problem for new construction projects — the interest expense can really add up, delaying operational profits (net cash flows) with higher APR loan amortization.  We can still offer more competitive (below market rate) interest loans, as a hybrid of mezzanine project debt and minority equity stake, but can also fund without any loan at all, where equity partnerships provide more flexible repayment terms.
    • Project “capital stack” does not include senior debt or encumber Project assets with a lien.  With projects above $50m, there is room for a senior lender to preserve more owner equity.  Know more
    • There is no longer any reason to use CAP debt as the equity split would be unaffected.  CAP funding can still deliver below-average interest rates for a construction loan – up to 25 years – where developer can defer principal payments (interest only) for up to 3 or 4 years.  But why incur interest at all?  Equity only is the better way to go.
  • Investor requires financial guarantee (CAG) to be in US$ or Euro’s, however project funding can be in a different currency and will not require FX risk coverage
  • Operational/performance, technical, developer execution and credit risk taken on by the investor.
• Minority carried interest is determined upon completion of due diligence, calculated based on:
  • Difference between the amount of guarantee or cash Surety and total Project funding, if any
  • Guarantee-issuing bank Credit Ratings and quality of guarantee instrument
  • Project overall (unlevered) IRR.
  • Note that cash surety is incrementally more valuable than a CAG for determining the equity split — for comparison, a cash deposit of 33% equates with roughly 50% SbLC.
• Draw schedule:  monthly, with a preference for consistent amounts each month.  Greater coverage (CAG or cash) equates with a faster draw schedule. Minimum CAG maturity of one year.

This structure significantly reduces the traditional administrative complexity, uncertainty and due diligence costs (and associated delays in reaching closing) that are common in most project finance.

How We Work 

Most widely-used guarantee type is a Standby Letter of Credit (SbLC).  Cash is a close second, and gaining popularity.  Tips for obtaining a proposed “specimen” of the eventual SbLC.

Summary of the steps

1. Contact In3’s deal flow manager or, if you are certain your project fits our criteria, register here.
   • We will review the total required budget, uses of funds, proposed sources of funding and verbiage for the instrument, which includes its face value.  This is the place to start if a cash deposit is not available.
     • If changes are proposed to the SbLC wording, we will ask for the involved bank officer’s RWA letter, which serves as their letter of intent.  Download templates
     • Once the guarantee wording is approved, or alternative assets identified (bond, MTN or gold), or cash surety deposit confirmed, then we will ask for the proposed monthly draw schedule.
   • Then the last “Essential” is an Authorization to Verify (ATV letter) with the issuing banker that they are ready to proceed.
   • Once the above steps are completed, we will request the rest of the project’s funding package (including MS Excel financials).  Formal due diligence typically takes 2-3 weeks, which if all goes well, puts a binding offer on the table for a minority equity carried interest without charging any initial fees.
2. Financial closing happens quickly once contracts are signed and upon receipt of the hardcopy instrument at our bank
3. Funding flows per draw schedule, and … project is completed, any guarantee(s) expire, or deposit returned, with project commissioned to begin operational cashflows.

Keep in mind that cash surety can serve as an alternative to any bank-involved CAG, as can certain aforementioned asset types, namely a registered and rated Bond, Medium-term Note (MTN) or gold, bypassing the need for an SbLC.  More

If you need assistance with the guarantee, consider involving a “sponsor” or if able to meet In3’s criteria, consider hiring In3 to assist with this. Some projects — typically those structured as a Public-Private Partnership, can obtain a Sovereign Guarantee from the Ministry of Finance in countries that can issue them.  Guide to help decide which type of financial guarantee delivers the most advantages for your situation here.

Article that explains what problems we solve:  Four notorious problems of mid-market project finance that CAP solves.

Please revert with any questions or when you are ready to take next steps.

Best,
In3 Customer Relations
info@in3capital.net
+1.831-761-0700 Ext 1