Leading Edge NoteStructured credit · principal protection · warrant upside
Illustrative sizing
$5MM net to Project

Contemplated future state — not currently available

From Single Deal to Institutional Market

The instrument is deliberately standardized. Identical paper across issuers is what makes appraisal, quoting, and a two-sided market possible.

Stage 1 · Fund I — Origination

Stage 1

Origination

One fund, one document, many issuers. Each unit is sized off the same waterfall — at $5MM net to Project sizing, $43.11mm of face per deal.

Fund I (Origination)

…n deals · same paper, different companies.

Deal A · software

Deal B · healthcare

Deal C · industrials

Deal D · consumer

What Fund I holds

A portfolio of identical instruments: principal claimable anytime · par at 5-yr maturity · 20% warrant attached · cash-neutral on tax. Standardization is what makes the rest work.

The old problem

Needs liquidity before year 5? The only exit is a claim: receives STRIPS in kind at accreted value (below par) and cancels the matching fraction of the warrant → upside surrendered for cash.

Stage 2 · Fund II — Liquidity

Stage 2

A dedicated liquidity pool

Fund II bids for seasoned units — STRIPS at accreted value plus the warrant at appraised value, less a reasonable discount; holds to maturity or resells.

File a claim

STRIPS only, warrant cancelled.

Sell to Fund II

STRIPS + warrant, less a discount.

Same cash need — one path destroys the upside, the other prices it.

Fund II earns the discount plus the warrant's remaining life; Fund I keeps optionality it would otherwise burn.

What this creates

  • A bid under every position — the first secondary price for the paper.
  • A two-sided market: originators sell, liquidity buyers accumulate.
  • Warrants stop being cancelled — they change hands and stay alive.
  • Repeat pricing → observable marks → a yield curve.

Stage 3 · The Marketplace

Stage 3

Contemplated future state — not currently available

Each step is a precondition for the next. None of it requires a change to the instrument.

  1. Step 1

    Standard Form

    One document, one waterfall, one claim.

  2. Step 2

    Appraised Marks

    STRIPS curve plus a warrant valuation methodology.

  3. Step 3

    Dealer Quotes

    Bid/ask, quoted against the UST comparison.

  4. Step 4

    Ratings / Tranches

    Pools of units; senior strips vs warrant strips.

  5. Step 5

    Exchange

    Many buyers, many sellers, cleared settlement.

The secondary-market and exchange concepts described on this page are contemplated future states and are not currently available.