Structured Finance

When organizations with significant portfolios need to recapitalize, CRF offers a Structured Finance solution. This approach maximizes the amount advanced to the organization and minimizes transaction costs. CRF evaluates the expected cash flow of a portfolio as a whole, underwrites the credit risk of the underlying loans, and determines a level of investment in the portfolio.

Typically, CRF purchases a senior interest in the cash flows of a portfolio over a specified period. When CRF’s participation has been fully repaid, the participation agreement is satisfied, and all remaining cash flows due from the portfolio revert to the lender.

Typical lender’s situation:

Large organization with sizeable number of loans to sell.
Seller prefers to avoid evaluation of individual loans.
Seller wants to fund either a project or ongoing program.

Key Benefits:

Maximum amount advanced because seller retains residual interest.
Lower overall transaction costs because of efficiencies of scale.

Restrictions:

Seller typically must hold residual interest in the loan pool.
Targeted minimum transaction: $3 million.

Costs:

Negotiated based on size. Loan value is adjusted to current market rates, resulting in a premium or discount depending on the interest rate of the underlying loans.

Example:

Lender D has made 100 loans of a similar size, term and interest rate totaling $5 million. To save time and effort, CRF evaluates the loans as a portfolio and determines its value. CRF buys the right to the cash flow of the entire portfolio and Lender D receives $4 million immediately, plus residual cash that is paid once CRF is paid in full.