As Trine matures, we are also gaining valuable insights as a company. Over the years, we have enhanced our borrower assessment processes and refined our approach to risk management, all with the goal of continuously improving our portfolio performance.
A new way of structuring deals
Over time, we have gained valuable insights into the markets we operate in and how to structure deals to retrieve an attractive risk-adjusted return for investors. As a result, we’ve changed the way we structure transactions and have improved and implemented a new way of structuring deals, moving from unsecured loans to secured loans.
The past model was wired to suit the needs of corporate finance and Solar Home Systems (SHS); however, as we move into a new market, Commercial and Industrial Solar, we have adjusted and improved our risk assessment process to suit the needs of all the markets we operate in. As a result, we are moving towards an asset-based lending model to decrease risk and minimize the possibility of delays or defaults.
Using assets to secure the debt
The new way we structure deals today is by using assets to secure the debt. In most cases, this means that if a borrower fails to fulfil its obligations, Trine may seize the asset that was pledged. This could, for example, mean that Trine would claim a pool of receivables or equipment from the borrower as a form of security if the borrower fails to pay back their loan.
The new transactional structure also considers positive cash flow generation, requiring borrowers to provide sufficient data that proves the ability to generate enough cash to pay the current and expected debt service with Trine in the face of any future volatility.
In comparison, previous loans provided by Trine were senior unsecured loans, including a negative pledge preventing the borrower from providing any asset-based security to any other lender.
This did not involve any collateral and meant that if the borrower failed to repay, Trine would, depending on its position towards other lenders, receive a proportion of the amount available for distribution among lenders. This did not allow Trine to easily dictate the process of any restructures or wind-down processes.
The difference between the two is that if a borrower defaults on a loan, Trine and its investors can now rely on the value of a secured pool of assets. This is one of the steps Trine is taking to reach a performing portfolio and will enable us to maintain a high level of control over the borrower’s assets. In turn, this will give Trine the opportunity to recover more principal and, as a result, a more attractive risk-adjusted return toward you as an investor.
If you have any questions or concerns, we are here to help. Reach out to us at hello@trine.com.