CAPITAL LEASE INFRASTRUCTURE AND PROGRAMME (CLIP)

Transcription

1 CAPITAL LEASE INFRASTRUCTURE AND PROGRAMME (CLIP) Contents: Energy, Social and Economic Infrastructure Funding Page 2 Process and Closing Timetable Page 3 Frequently Asked Questions Page 4 Revised 31 st Jan 2014 Page 1

2 Energy, Social and Economic Infrastructure Funding Crossway Capital has forged a strategic alliance with a Gate-Keeper Organisation in UK that is an appointed representative for a funding programme capitalised by more than 80 of the world s largest life companies and pension funds. They wish to invest DIRECTLY in economic and social infrastructure projects, worldwide, seeking only a predictable long-term return on their capital. They provide 100% funding on to-be built projects and seek no equity involvement whatsoever. Their sole funding criteria are that your entity has an acceptable credit agency rating and that the project is shovel ready. CLIP will fund any project backed by MIGA, OPIC or similar underwriting. Regard our programme as a project-based, private investment alternative to a bond Issue. Although far quicker and with greatly reduced costs. The investment grade rating for provincial governments, municipalities or quasi-government Bodies will usually reflect those of the national government. If you do not already have a rating, Crossway Capital will point you to the nearest Moody s Investor Services offices in order that you can start the process. There is an annual subscription fee to Moody s in order that you can maintain your rating. Following are the key points: Deal Value Range: $50m to $1bn+. Completion Time: 90 to 120 days. Term: 10 to 25+ years depending on value and nature of transaction. Cost of funds: Based on a spread of comparative rated bond issues. Ownership: The funder assumes the financial responsibility for the asset and secure it for the funding term while the client/entity retains financial and operational control over it. The only requirement on the client is a lease payment to be made through the SPV set up for the transaction. The asset is returned 100% to the borrower at no cost at the end of the funding term. Equity: None required. Project Type: All infrastructure including schools, hospitals, social housing, government buildings, waste/water management, waste-to-energy etc. Funding Stage: Project must be shovel ready with all permits, licenses etc available for the funder s due diligence. Pre-spent soft costs can be added to the funding. Revised 31 st Jan 2014 Page 2

3 Fees: a) Completion/Broker Fees. 2% to 3% added to cost-of-funds and spread over the funding period. b) Commitment costs and deposit up to a maximum of 1% of the deal value. Please see Frequently Asked Questions Item 9 (Page 6). Process and Closing Timetable Step Activity Documentation Time frame 1 Crossway Capital contacted by client, and subsequently forward deal to its chosen Gate Keeper. Completed funding submission Day 1 2 Gate Keeper discusses deal with funder, who provides indicative lease pricing, terms and structure alternatives 2a Gate Keeper, through Crossway Capital obtains additional credit, site and market information that may be required and pricing, terms and structure are provided upon review of data. 3 Preliminary Terms or Letter of Intent is/are prepared by the funder and e- mailed to Gate Keeper, who reviews. Modifications are made as necessary. Client engages with Gate Keeper. Gate Keeper progresses Moody s rating (where required) 4 Gate Keeper discusses deal and terms and conditions with client. The funder is available as needed. Client agrees to move forward with transaction. 5 Funders issues a formal offer via Gate Keeper Lease (unsigned, draft or abstract will work to provide preliminary pricing terms) As requested: client financial statements, market demographics, project profile, site plan, maps and/or aerial/project photos Terms or Letter of Intent. Offer with Exhibits 1 to 2 days 1 to 5 days Same Day Client s timetable 1 day 6 Gate Keeper delivers formal offer to Client signs offer, 7 to 14 days Revised 31 st Jan 2014 Page 3

4 client. Client reviews and accepts terms of Application or negotiates to modify including deposit for third party reports, legal, etc Offer has expiry date 7 Due diligence begins, including review of third party reports, lease, survey, site inspection (if necessary), insurance coverage 8 Commitment is issued by funder As requested: Appraisal, Environmental, Engineering, Survey, Title, Commitment, organisational docs, insurance, etc Commitment with Exhibits 9 Client accepts commitment Client accepts commitment 10 Lease terms & capital are rate-locked Rate lock agreement, confirmation, etc 2 to 21 days (due diligence is performed post commitment on many transactions. Within days of offer or completion of due diligence 3 to 5 days expiration on Commitment Varies, but usually within days of commitment 11 Funding of transaction is closed Relevant final document 15 to 45 days Frequently Asked Questions 1. Does the Programme cover operation as well as construction costs? All operational costs are the responsibility and under the total control of the lessee. The Programme covers all costs required to bring the project to full operational status including all pre-development costs (land acquisition, planning, engineering, permitting, etc.) and construction (both hard & soft costs). Also, any and all costs associated with bringing the project through stabilization until it produces the projected cash flow. 2. What do you mean by shovel ready? It means that the only missing element to the commencement of construction is the financing, with all other matters resolved. 3. Because you base your lending criteria on the Credit Agency rating for the off-taker, municipality or government are they underwriting the funding? Yes. However, the risk is significantly mitigated by the enhanced net cash flow from the project, due to the lower overall cost of funds provided through the Programme, which now flows fully to the lessee through the SPV set up for the project. Revised 31 st Jan 2014 Page 4

5 4. Can the Programme be applied to existing equity, sub-debt and other funding structures? No. The Programme replaces the existing equity/debt structure as a stand-alone, leasebased funding structure that can be applied to individual projects. The asset is taken as security and has to be seen on the funder s asset register as unfettered by other debt or equity liabilities. or it could be yes, we can totally refinance existing structures. 5. Can your Programme fund multiple projects at one time? Yes, we welcome social housing and other projects which, provided they are all shovel ready, can be aggregated into one transaction through one SPV/lessee. 6. In energy transactions, which party is ultimately taking the risk of the technology working, and the operator performing to target? There are many technologies emerging in the alternative/renewable energy sector and, in most cases, the risk falls on the operator providing the technology. The Programme prefers to work with proven companies and technologies to mitigate risk, and can possibly assist with insurance companies that will provide performance insurance for the operator. These costs are added to the costs of funds and applied over the term of the lease. We will fund all forms of renewable and alternative energy projects. 7. What kind of covenants does your Programme require? The Programme does not require any of the covenants as demanded by traditional lenders. It is a lease-based funding programme that funds infrastructure projects based on the credit agency rating of the entity involved. In most cases this will be a government or quasigovernment body. In those cases where the lessee does not possess the required rating, as is often the case with alternative energy projects, then the utility off-taker must supply the requisite unconditional guarantee for the lease payment through the PPA (Power Purchase Agreement). 8. How can the investors lend at such low rates? The sole objective of the mutual funds investing into this programme is to secure long term, predictable returns on their capital. At the moment they have far too much liquidity and this programme allows them to invest directly with the investment manager into government and quasi-government infrastructure propositions. This enables them to meet their requirements to invest in vehicles of suitable quality, reduce their liquidity and meet obligations to their pensioners and life policy holders. The programme is a far simpler structure than traditional equity/debt programs (and which frequently involve stringent bond requirements) and therefore does not require teams of Revised 31 st Jan 2014 Page 5

6 expensive bankers and lawyers to assemble bespoke deals, nor is there a fund manager between the borrower and the investor taking a mark-up. Perhaps the question you should be asking is: Why has it been so complex and expensive up till now? Sale/leaseback and to-be-built lease-based structures have been utilised in the USA for many years where the federal government is the largest tenant/lessee nationally. 9. Are there any other costs outside of the cost of funds charged by the fund? a) There are due diligence costs, which will be presented in your Letter of Intent and which are determined by the complexity of the transaction. It is very difficult to give a precise indication of cost. However, estimate from $25,000 for a straightforward sale and leaseback of a government or local authority asset to $250,000 for a to-be-built offshore wind-farm. Refunded at closing via the project trust account. b) A negotiable lease deposit fee, up to a maximum of 1% of the deal value, and substantially less on government or quasi-government transactions. This fee is paid at the signing of the final commitment (when the investors have their funds committed). Refunded at closing via the project trust account. c) There is a CPI/RPI escalator which is standard in most long-term leases. It applies solely to an increase over the annual lease payment for the previous year, and has no impact on the fixed interest-rate/cost of funds being charged to the project. The escalator operates at a maximum 2% over the previous year s lease repayments. To clarify, if the first year s lease repayment is $1m, year 2 (+2% on Year 1) will be: $1,020,000, year 3 (+2% on Year 2): $1,040,816, year 4 (+2% on Year 3): $1,062,057 etc. To enquire, go to or Submit your online enquiry here. Revised 31 st Jan 2014 Page 6