Stronghold solutions enable project sponsors to access monies from global capital markets at terms & scale otherwise unavailable.
Features
Patient capital - Stronghold financing needs no debt service or dividends from its investment in a development for the first 3 years. A developer's obligations to a Stronghold investment will accrue, but 3 years gives a project time to get into production, stabilize, and produce return.
Debt financing - Stronghold has the flexibility to make investments in development projects as debt. Stronghold does require a definitive plan for repayment.
Cost of capital - Stronghold solutions provide cost of investment to a project highly competitive with conventional sources of capital (e.g., private equity investments) for comparable risk.
Efficient cost/use of capital - For appropriate projects, a Stronghold investment can take a mezzanine position subordinate to a commercial bank. The project draws down the developer’s equity and the Stronghold investment prior to the project’s need for the commercial bank portion. This approach provides a highly competitive “blended rate” (total cost) of capital, typically between 9% and 10% given current borrowing costs for commercial loans.
Access to larger pools of capital - Stronghold solutions give sponsors access to the world's largest pools of institutional capital.
Shariah compliant - Stronghold can cast its financing programs as Shariah compliant.
Transaction Overview
Evaluation Process
Following an initial discussion, Stronghold will assess the viability and appropriateness of a specific project.
To support this evaluation project sponsors will submit:
Business proposal
Pro Forma (annual) financial projections
KYC|AML due diligence packages
Submissions should include:
Investment requirements (amount & timing);
Capital stack (equity, Stronghold investment, commercial lender) projected amounts;
Projected free cash flow available to pay the Stronghold investment obligation after all other expenses;
How long the project needs the Stronghold investment;
Required grace period (up to 3 years);
Exit event (earn out, refinancing, IPO, other);
Projected EBITDA year-by-year;
EBITDA multiple to calculate Enterprise Value; &
Projected Enterprise value.
During this process Stronghold works closely with project teams to optimize the value proposition to both the project sponsors and potential bond buyers.
If a project qualifies, Stronghold team will then draft indicative termsheet(s) for the:
Project investment(s) and
Bond instrument(s) to support the project investment.
Costs
Stronghold programs have only 2 sets of costs for project sponsors:
1. Program design (engagement) fee:
$50,000 per $100 million of project investment (negotiable a project has sufficient scale);
Non-refundable; and
Due on signing the project investment termsheet.
While no one can guarantee the bond placement to finance a specific project, Stronghold will only enter into a project investment termsheet on condition that the signing project sponsor represents they have sufficient confidence (by their own measure) that someone or some entity will purchase the bond.
2. Enhanced due diligence investigations:
Regulatory requirements of Stronghold financings require that project sponsors supply due diligence information and authorization of enhanced due diligence investigations on the company's management, board of directors, and major shareholders.
Project sponsors pay the cost of these investigations (approximately BP 2,500 per individual). Payment due upon signing of a project investment term sheet.
2. Required returns on the Stronghold investment/loan to a project dependent upon:
Yields on long term sovereign debt instruments,
Required grace period,
Negotiated risk premium,
Program operational costs, and
Required returns to bond buyers.