[abfunders]

Client with a need to replace the $3.85 million loan.
There is $220mm of excellent collateral.
There is a PG behind this of a multibillion dollar individual who is on the board, so he can't make the loan himself, since he needs to stay an arm's length away.

They want a collateralized business loan against the equipment for $3.85mm with the PG of this multi-billionaire.

They have not sold their product yet (65,000 preorders), they have been around for 9 years, and the owner have altered their payments on loans over the years. The board member member finally is willing to do this because of how much equity he already has put a lot of equity in and and has a lot to gain.

Any ideas?

[Kevin Henry-Seacoast]

Client with a need to replace the $3.85 million loan.
There is $220mm of excellent collateral.
There is a PG behind this of a multibillion dollar individual who is on the board, so he can't make the loan himself, since he needs to stay an arm's length away.

They want a collateralized business loan against the equipment for $3.85mm with the PG of this multi-billionaire.

They have not sold their product yet (65,000 preorders), they have been around for 9 years, and the owner have altered their payments on loans over the years. The board member member finally is willing to do this because of how much equity he already has put a lot of equity in and and has a lot to gain.

Any ideas?

Sounds like an equity deal. If I read this right.... The Company has been around for 9 years and has not sold any products? I am guessing the collateral is existing property, plant, and equipment along with IP? I don't know of any equipment lenders that are going to lend on equipment that has not generated revenue.

[abfunders]

They're in the middle of a large equity raise. The main equity guy is the one who contacted me. They've got about $2mm in the last few months that just came in.
They're actually quite famous.... for not building their product.

Kevin, I agree. This guy is forcing me to ask around. He says, "What, it's the best PG in the country next to Bill Gates!" I told him, "But the equipment is USELESS without building a product!" Equity and debt are totally separate animals.

The one who's willing to give the PG is currently has debt and equity with them, and wants to take the debt and move it to equity.

Like I said, any ideas? This equity guy tries forcing me to talk about loans with companies that are pre-revenue.

(Force, meaning he's submitting deals to me - and one of them might have the debt side eventually come through.)

[Big Mack]

I saw a deal very similar to this a year go but the collateral was $220MM worth of art.

[Kevin Henry-Seacoast]

They're in the middle of a large equity raise. The main equity guy is the one who contacted me. They've got about $2mm in the last few months that just came in.
They're actually quite famous.... for not building their product.

Kevin, I agree. This guy is forcing me to ask around. He says, "What, it's the best PG in the country next to Bill Gates!" I told him, "But the equipment is USELESS without building a product!" Equity and debt are totally separate animals.

The one who's willing to give the PG is currently has debt and equity with them, and wants to take the debt and move it to equity.

Like I said, any ideas? This equity guy tries forcing me to talk about loans with companies that are pre-revenue.

(Force, meaning he's submitting deals to me - and one of them might have the debt side eventually come through.)

Logically....if they have all this equity in, are famous billionaires, are in the midst of a large equity raise.....why in the hell do they need a $3.8 mil loan for equipment? It's almost a certainty that it's not going to happen and I would question "why am I so lucky to get this call?"

[abfunders]

So when I asked that question, our friendly equity broker told me a very logical answer....
As he sits on the Board, any loan he has to them automatically becomes a personal vested interest, and he'll get a much lower priority and less of the cut if they actually do go bankrupt and force them to sell.

He needs to stay some sort of arms' length away now that it's moving somewhere.
If they go bankrupt when he's not lending directly to them, and he's only the PG, then the company if they really go under can start selling off the equipment first and pay their lenders before things hit the fan.

He's hedging his bets, that's all. I'm not an equity broker to understand fully, but there is an answer.

[Kevin Henry-Seacoast]

So when I asked that question, our friendly equity broker told me a very logical answer....
As he sits on the Board, any loan he has to them automatically becomes a personal vested interest, and he'll get a much lower priority and less of the cut if they actually do go bankrupt and force them to sell.

He needs to stay some sort of arms' length away now that it's moving somewhere.
If they go bankrupt when he's not lending directly to them, and he's only the PG, then the company if they really go under can start selling off the equipment first and pay their lenders before things hit the fan.

He's hedging his bets, that's all. I'm not an equity broker to understand fully, but there is an answer.

He has every right to put in any dollar amount he wishes at a reasonable valuation to protect his interest an the interest of the other share holders not to mention he has liability with the PG. They cannot force this on him period. Be wary of guys that claim to be rich asking for money.....especially for a 9 year old company that hasn't made a dime.

[Christian]

I think I know who your client is... Last letter of the founder's surname is o?

[abfunders]

Christian, you are correct