Stronghold solutions enable project sponsors to access monies from global capital markets at terms & scale otherwise unavailable. Stronghold solutions provide patient capital as debt or equity; low cost of capital, use as mezzanine financing (synthetic equity); no requirement to retain equity; & access to the world’s largest pools of capital.
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 or equity - Stronghold has the flexibility to make investments in development projects as debt and/or equity. Stronghold does require a definitive plan for repayment of its principal and/or an equity take-out.
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 position 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 8% and 9% given current borrowing costs for commercial loans.
Equity return - In addition to a competitive cost of capital, unlike a traditional private equity investment, Stronghold has no requirement to retain equity in a project. Upon repayment of contractual obligations to Stronghold, any title to a project or equity reverts to the developer.
Access to larger pools of capital - Stronghold solutions gives developers access to the largest pools of institutional capital in the world.
Shariah compliant - Stronghold can cast its financing programs as Shariah compliant. Please contact info@StrongholdLTD.bm for additional information.
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. Agreed IRR 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.