Illustrative sizing · $5MM net to Project
What Each Party Gets
The structure pays every counterparty out of the same closing waterfall and the same maturity outcome. No party is compensated at another's expense.
Party economics
Lender
- Principal collateralized 1:1 by U.S. Treasury STRIPS reaching par at year 5.
- Liquidity at any time: claim any fraction of the STRIPS without a default, a consent, or a sale process.
- Cash-neutral taxation — the stated coupon equals 21% of each year's interest income, so net cash to the Lender sums to zero.
- A 20% fully diluted warrant with nominal strike, retained in full even on a maturity default.
- Downside floor of 1.00x after-tax (1.01x gross) in the FAIL case, with the warrant retained as a residual option carried at $0.
Project
- Growth capital with no amortization, no cash sweep, and no financial maintenance covenants.
- A five-year bullet maturity, giving the full term to compound the capital before any repayment.
- 34% of the cell's equity by option, exercisable at maturity on full repayment — a funded financing vehicle for the next raise.
- Dilution of 20% fully diluted, fixed at closing, with no ratchet and no repricing.
- No portion of the non-project proceeds is ever property of the Project, so the structure is clean for future lenders.
Broker
- 0.50% upfront fee paid at closing out of the funds flow.
- A 10% option on the cell's equity, exercisable at maturity on full repayment.
- A standardized instrument that can be quoted against a Treasury comparison, shortening the sales cycle.
- Repeat issuance: each completed deal capitalizes the counterparty for the next one.
Insurance Company
- Premium income of 4.92¢ per dollar of note face, received at closing as a tax prefund.
- A retained 51% interest in the cell — control of a segregated, bankruptcy-remote vehicle.
- At maturity the cell holds matured, tax-paid U.S. Treasuries equal to note face: a bank-like balance sheet.
- The right to write the next Leading Edge Note's policy or to lend against the matured collateral.
Dealer Custodian
- 0.25% upfront custody fee paid at closing.
- A 5% option on the cell's equity, exercisable at maturity on full repayment.
- Custody and settlement of the STRIPS, including in-kind delivery on any claim.
- Quoting and mark-making on the paper against the UST comparison as volume develops.
Cell option values at maturity
Measured on the matured STRIPS at face.
| Holder | Share | Value at maturity |
|---|---|---|
| Insurance Company — retained interest, not an option | 51% | $21,984,708 |
| Project | 34% | $14,656,472 |
| Broker | 10% | $4,310,727 |
| Dealer Custodian | 5% | $2,155,364 |
| Total — equal to note face | 100% | $43,107,271 |
Illustrative example only; all figures are hypothetical. Not an offer, a solicitation, or tax, legal, insurance, or investment advice.
Options are granted at closing, exercisable only at maturity and only if the Note is repaid in full; forfeited on a maturity default and reduced pro rata by any claims filed. Broker and Dealer upfront fees were separate closing payments.
A financing that capitalizes the next one
A successful financing does more than repay the Lender. The cell emerges holding $43.11mm of matured, tax-paid U.S. Treasuries — a funded, in-place financing vehicle, effectively a bank-like balance sheet, for the Project's future financings. The Insurance Company (51%) controls it and can write the next Leading Edge Note's policy or lend against it, and the Project (34%) is its second-largest owner. Each completed deal capitalizes the counterparty for the next one.