[Issuer] Branch Series 3

We are pleased to announce 1754 Factory LLC, Series 3 (“Branch Series 3”), which represents our third offering to gain exposure to emerging market consumer loans. 1754 Factory has launched Series 3 (the “Issuer”), a Delaware LLC, which will offer for sale to investors tokens, as described below, corresponding to a secured non convertible debenture owed to the Issuer.

Issuer: 1754 Factory

The Issuer will issue two tranches of ERC-20 tokens: DROP Tokens and TIN Tokens. The DROP Tokens will make up 90% of the total asset pool, and will be offered for sale to investors on the terms described herein and in the Subscription Agreement provided to prospective investors. The TIN Tokens will make up the remaining 10% of the total asset pool, and will be subject to first losses up to the full amount of their value. Davoa Capital, the manager of 1754 Factory LLC, Series 3 will purchase a portion of the TIN Tokens to demonstrate their confidence in the asset pool and to act as a buffer against losses to investors in the DROP Tokens.

The Issuer will use Centrifuge, Inc.’s (“Centrifuge”) blockchain protocol system, known as the Tinlake Protocol, to mint the tokens. Issuer’s use of the Tinlake Protocol will be subject to the terms and conditions of that certain Tinlake Protocol Service Agreement, dated as of December 17, 2020 (the “TPSA”), between the Issuer and Centrifuge.

Summary of Terms

Originator Details

Originator Branch International Financial Services Private Limited (“Branch India”), subsidiary of Branch International Inc

Largest Markets: India
Years in Operation: 2 years

Asset Details

  • Collateral Description: Secured Non Convertible Debenture issued by Branch India
  • Purpose Fund: consumers loan origination in India (description below)
  • Collateral Term: 3 years
  • Security First lien security interest in Branch India present and future assets including loan book, cash and cash equivalents

India Loan portfolio description
Type of loans Consumer loans

  • Average loan Size: $49
  • Average loan tenor: 70 days

Loan portfolio historical performance * FY 2020:

  • Jan - Apr: 5%
  • May - Sep: 19% (due to Covid 19 and government moratorium on debt repayment)
  • Oct - Dec: 3%
  • Jan-May 2021: 6%
    Average loan interest rate : 17% for 70 days (>120% annualized)

Offering Details

  • Special Purpose Vehicle: 1754 FACTORY, LLC (SERIES 3)
  • Target Launch Size: Up to 10,000,000 Dai
  • Token Investment:
  • Series 3 DROP Token (token symbol BR3DRP)
  • Series 3 TIN Token (token symbol BR3DRP)

Launch Date June 9,2021

  • Term: The debentures have a 3 yrs maturity
  • Seniority: Senior if BR3DRP are purchased / Junior if BR3TIN are purchased
  • Distribution Flow: Distributions will be made pro rata to BR3DRP investors until fully repaid (principal plus interest); thereafter all further distributions will be made pro rata to BR3TIN investors.
  • First Loss % / TIN Ratio % 10%
  • Maximum Epoch Duration: 5 days / 120 hours
  • Security Structure: 506(c) offering under Regulation D of the US Securities Act of 1933
  • Investor Tax Documents: 1099-MISC
  • Investors Available to U.S. and Non-U.S. Persons, U.S. Persons must be “accredited investors”

About the Asset Originator

Branch India is a regulated non bank financial company, organized under the laws of India which offers unsecured loans to consumers. Branch International (Parent) was founded in 2015 and has operations in Kenya, Nigeria, Tanzania, and India, and has since originated over $500M in loans to over 4 millions borrowers. Branch raised $270M in debt and equity from reputable investors including Andreeson Horowitz, Visa and the World Bank.

Branch India primarily offers two types of loans:

  1. Nano Loans which range from 500 to 50,000 rupees with maturity of up to 12 months (2 month average first loan). Nano loans have monthly interest between 2 and 3% and are processed instantaneously. Only KYC document is required for this type of loans
  2. Salary Loans which range from 15,000 to 200,000 rupees with maturity up to 24 months. Salary loans have monthly interest between 2 and 3% and take up to 3 days to process. The applicant needs to provide KYC documents and proof of employment (salary slips, bank statements, etc).

Pool Description

The aggregate value of the assets owned by the Issuer is expected to be 10,000,000 Dai. The assets will be issued in three separate tranches of 3 year maturity each: ~1,000,000 Dai (tranche 1), 4,000,000 Dai (tranche 2) and 5,000,000 Dai (tranche 3). Series 3 will be a revolving pool. Upon repayment of the debentures and satisfying any Investor withdrawal requests, the Issuer will reinvest the remainder of the proceeds in new debentures rather than distributing all of the profits back to Investors. The Issuer will continue to reinvest and grow the assets on behalf of its Investors.

Credit Underwriting

Davoa Capital and the Issuer employ a rigorous due diligence process which included:

  • Review of asset originator credit underwriting process
  • Review of asset originator financials results
  • Review of asset originator loan book
  • Due diligence sessions with asset originator leadership (CEO, CBO, CFO) and risks officers

Based on the due diligence material above, a debenture subscription agreement was negotiated and agreed with the asset originator. The asset originator has granted to the issuer, First lien security interest against all present and future assets of the asset originator including their loan book, cash and cash equivalents, current assets, movable assets, tangible and intangible assets and goodwill.

FOR DETAILS PLEASE CONTACT 1754 Factory at [email protected]

6 Likes

How often will an epoch be performed for withdrawal of DAI?

Hi @Fab what is our exposure to 1754 when investing in this pool. Is this an SPV structured by Centrifuge or is it a separate company?

Hi Everyone,

There is currently no available liquidity which is preventing redemptions. Once additional liquidity is added redemptions will be begin to process at the conclusion of the epoch.

The way it works:
At the end of the epoch, all locked orders will be processed and executed at the current TIN/DROP prices considering the max reserve amount, min TIN risk buffer and available liquidity is enough to cover redemptions. If part of the redemption could not be executed, it will be rolled over into the next epoch and these tokens remain locked. After the epoch turn, investors can collect the DAI from the executed orders in the UI. This locked order can be cancelled at any time.

For additional reading on the process please review the link below:

Regards,

Jay

1 Like

Hello team Branch Series 3,

I’ve sent you an email but haven’t received an answer so I’ll try it this way:

I’m a liquidity provider for your Tinlake pool since more than a year and unfortunately I had to learn now, that I’m not able to withdraw my investment since there is no available liquidity in the pool.
That’s disappointing of course because that means an investor is not able to plan with its investment since it is unpredictable if there will be enough liquidity in the pool in the future or not.
So when can I expect to see liquidity again and if there won’t be any investments in the next 1-2 years, what will happen then?
I see average maturity is 35.2 months, what does that mean exactly or what happens after this period with my investment in the pool?

@Fab could you please address @Babes-Papes inquiry above?

Thank you.

Hi @Babes-Papes @Fab @Rhano. Apologies for the long post, but wanted to provide my analysis of the pool.

From what I can see there is no available liquidity currently since all the invested amounts has already been allocated into active loans. Obviously as you state this does make it hard to plan investments but at the very least from reviewing the pool’s assets page we can see that the next assets will mature by June 19 2023.

This could potentially be earlier if the end borrower repays the loan early as well which would benefit them by saving interest but obviously they are under no obligation to repay before the maturity date.

You, as well as other investors with redemption request, can begin to see redemptions flow when liquidity is either added to the pool by the repayment of assets once due or by new investments (benefit of a revolving pool assuming there is new investments made).

The average maturity here is the general length of the assets invested in, although much of that time has already passed since due to a lack of new investments no assets could be financed since February of this year.

For planning sake, I would plan investments around maturity dates, amount of redemption requests for a single pool as found on the investments page, and keeping an eye on new investments that may come in (also viewable on the investment page).

I would also like to hear from @Fab @Fabien but I cant imagine he would share anything I haven’t mentioned above.

4 Likes

Looks like an investment came in and the epoch closed for 50k.

1 Like