CASE STUDIES

Performance Guarantee Insurance Enables Low Cost Financing

Situation: Client seeks to refinance existing debt for less costly long-term debt on two Renewable Diesel Plants.

Issue: Need to broaden the potential institutional investor base capable of making a minimum $300MM investment. Without an investment grade rating for the plant / enterprise, the Client is/was having difficulty finding a refinancing partner.

Solution: In 2019 Edge applied the PGI program for the benefit of a Client in the Renewable Diesel sector. Our Client sought to raise $300MM to develop two renewable diesel facilities. As a pre-revenue operation, sources for capital were limited. Edge structured a PGI program that provided an overarching umbrella coverage that guaranteed the projected revenue of the two facilities for the next 10 years. Leveraging this coverage and Edge’s proprietary ratings model, Edge was able to secure an investment grade rating on behalf of its Client.

Every aspect of the operation was underwritten including the novel technology that would ultimately drive revenue. As a direct result of the PGI program coverage, our Client secured a $300MM facility at attractive rates as lenders were well protected against the loss of principal and interest.

In 2020, our Client will sell debt in the form of “A-“ Rated secured bonds for an additional $200MM.

The PGI Program – Who can benefit: Companies seeking to raise from $5MM -$500MM; in debt and/or equity using new and/or unproven technology; private equity firms seeking to insure financial results across a portfolio of companies; lenders seeking to mitigate downside risks associated with potential poor financial performance for existing and future loan portfolios.

Raising Money For New Technology

Situation: Client seeks to raise money for a new technology with immense economic value but was unable to convince lenders that projected returns were reliable.

Issue: If the lender were to fund the client’s project and the technology did not perform as expected, the lender would suffer a significant loss. As a result, lenders were unwilling to fund our client.

Solution: Edge created a bespoke Performance Insurance program which addressed risks associate with the operation of the facility and the technology of our client’s Project by guaranteeing a level of production sufficient to meet debt service and by supporting the warranty obligation of the technology provider. Insurance was provided by an S&P AA rated insurance provider. Lenders recognized the value of the Edge solution because projected returns were now insured. Our client ultimately received funding for a total of 400M.

If our client’s quarterly output falls below the required output, the performance level from the Project necessary to meet the debt service owed to the Lender, then a Claim of loss can be made to the insurer

The Edge insurance solution is of particular benefit to new and established businesses because it delivers the following key benefits:

  • Improves bankability and access to capital

  • Stabilizes revenue stream

  • Provides more cost-efficient financing (i.e. credit enhancement)

  • Provides balance sheet protection

  • Supports new green technology

  • Offers a flexible insurance structure to attract lenders and investor

  • The coverage is provided by a AA-rated international insurance carrier.

 
 
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