Receivables Monetisation Funding Solution for Real Estate-focused Sponsor (Lender)

  • Provided support on complex and time-intensive deal structuring

  • Proposed and developed a unique approach to execute the solution

  • Prepared a dynamic model for new and additional projects

  • Output used by the client to seek deal approval

  • A real-estate-focused client was looking to fund an under-construction development project for a key relationship
  • Key challenges faced by the client were as follows:
    • The client was unable to fund the project owing to internal investment limit guidelines on single-party exposure
    • It wanted to propose a non-traditional deal structure to its Investment Committee
    • It suggested a receivable monetisation plan for the developer’s multiple projects to distribute counterparty risk
    • The client sought Acuity Knowledge Partners’ help to execute the proposed solution, as it wanted to proceed with the deal to maintain its relationship with the developer
  • Acuity Knowledge Partners conducted a detailed white boarding session to understand the deal’s background and the funding solution to be executed
  • The cost outlay, receivable realisation, cost mismatch, debt requirement and paying capacity of each project and the cluster as a whole were analysed to evaluate the repayment capacity of the said projects under different scenarios
  • Key projects nearing completion and with a clear visibility on short-term cash flows were identified to mitigate completion and default risks
  • All-encompassing qualifying criteria were developed for individual receivable accounts and cash flows, deal covenants and coverage ratios were calculated under various stress scenarios for better visibility
  • The funding was structured with a defined sweep-based repayment by ring fencing cash flow releases of the projects identified
  • The analysis prepared by Acuity Knowledge Partners’ team provided flexibility to dynamically change the projects included, individual receivable accounts, credit assumptions, asset characteristics, etc., which helped finalise the structure
  • The team also helped with discussion materials, along with detailed analyses and industry research for the client to build a case for the proposed solution with both the internal and external stakeholders
  • With Acuity Knowledge Partners’ performing the required modelling and analyses on this time-consuming and complex deal, the client was able to structure the deal and run it with internal stakeholders and proceed with deal execution
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