POP: BlockTower (Series I - IV)
- Business Name: BlockTower Credit
- Target Launch Date: December 13, 2022
- Location and Team Size: Miami and New York, > 30 members
- Key Professional Partners (legal, accounting, operational, technical, structuring):
- BlockTower Credit
- Reed Smith LLP
- Ankura Trust Company
As an institutional structured credit investment fund within one of crypto’s most prominent asset management firms, BlockTower Credit is committed to professionalizing Real World Asset (RWA) DeFi and proving the merits of distributed ledger technology to the world. We aim to do so through our partnership with Centrifuge and Maker, which aims to deploy over 150M Dai into senior credit facilities, whole loans, and Investment Grade structured credit in the real-world. We maintain structural alignment with Maker on each deal by taking a significant first-loss, junior capital position through the acquisition and retention of the TIN token associated with each of these Maker integrated Tinlake pools.
A summary of our transaction with Maker through Centrifuge is as follows:
- Counterparty: BlockTower Credit
- Real World Asset(s): Senior credit facilities secured diversified pools of short duration, real-world loans and credit receivables. Whole loans. Investment Grade structured credit.
- Aggregated, Initial Maker Debt Ceiling: $150MM
- Minimum BlockTower Junior Capital Position: 30% junior capital (TIN) on every exposure
- 12-month goal: Demonstrate exemplary performance, scale responsibly, and play a critical role in raising the bar for Maker through RWA arranger efforts and governance participation
- DROP Rate: 4% - Fixed
Structure: Risk & Terms
This POP contemplates four (4) Tinlake pool deployments matching four (4) Maker RWA Vaults. The 150MM DAI aggregate Maker Debt Ceiling will be spread across four Maker vaults / Tinlake pools, of 20MM, 30MM, 30MM, and 70MM DAI, respectively.
Within this structure, BlockTower Credit aims to arrange or originate products, including:
- Senior Secured Credit Facilities - Traditional asset-backed private credit strategies, focusing primarily fintech and non-bank originators. These facilities will have terms less than or equal to 36 months with the advance rates to the originator ranging from typically 60 to 90%.
- Whole Loans and Receivables - Loans and receivables purchased in the bulk transactions with term up to 72 months (subject to a cap of 50% of the pools with maturities greater than 48 months)
- Investment Grade Structured Credit - Investment grade asset-backed securities (ABS). These products typically maintain a weighted-average life (WAL) of less than 48 months. Exposures will be to structured credit sebsectors like:consumer ABS, auto ABS, CLOs, Residential Solar ABS, Credit Card Facilities, etc.
Maker will benefit from a minimum credit enhancement or subordination of 30% from BlockTower Credit holding the TIN position. This means that BlockTower Credit will absorb any first-losses associated with any Tinlake pool and vault pair, on top of any expenses BlockTower has incurred and will incur, like legal, etc. At full deployment of Maker’s debt ceiling, BlockTower Credit will have, in aggregate, at least $64 million of its own capital in the form of DAI in the first loss position. Furthermore, BlockTower Credit intends to overfund each vault to ensure that the Minimum TIN Percentage is always maintained. Overfunding will mean that Maker’s exposure in a Vault is proportionately reduced to the extent of such overfunding.
Further protections for the senior creditor, Maker, are implemented in our legal structure for the above transactions. We have adopted an Indenture Trust structure, which Centrifuge has pioneered with Maker (see discussion here). We have also onboarded agents like Ankura Trust, who provide critical services related to asset eligibility verification, loan NFT confirmation, and payment servicing, etc. These protections, along with that provided by the Centrifuge Tinlake protocol, ensure strong alignment in our transactions.
BlockTower Credit will maintain its minimum 30% TIN position through investments from its fund. Through junior capital, BlockTower Credit is able to bring institutional investment and rigor to both the Maker and Centrifuge community. As the sole and primary TIN token holders, BlockTower Credit provides enhancements to the senior lender (Maker) by providing significant first-loss capital. Furthermore, this capital ensures strong alignment of incentives between BlockTower and Maker.
Timeline (work so far):
For well over a year, BlockTower Credit has dedicated significant resources to both Centrifuge and Maker in building community alignment, structuring critical aspects of the deal, and operationalizing the transaction. Our official Maker introduction and proposal were posted in July 2022. Since then, we’ve engaged finance, legal, and technical subject-matter experts to refine the transaction, resulting in comprehensive risk and technical assessments. Our proposal was evaluated by the community and passed the final Maker Governance Poll with 78% voting “yes” and only 0.17% voting “no”. With the passing of the Maker Executive Spell on December 11th, we would like to finalize the deployment of the related Tinlake Pools with this POP Submission.
Centrifuge has and continues to be key partners in our mission to bring DeFi and credit closer together. We’re eager to work with the community, so please let us know if there’s anything that our team at BlockTower can help clarify. Should you have questions, please do not hesitate to reach out!
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