[Issuer] Untangled Finance: Diversified Trade Finance Fund

Real World Assets Pools
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About
UP Series LLC is a Digital Credit Fund set up by Untangled Finance, a digital securitisation platform.

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Company Name Untangled Finance Limited and UP Series, LLC
Website https://www.untangled.finance
Asset Type Trade Finance Assets
Pool Summary Short term, diversified exposure in trade finance assets from multiple asset originators
MIP 6 Application MIP6 Application - Untangled Finance DROP (U-DROP): Diversified Trade Finance Fund - Collateral Onboarding Applications - The Maker Forum
Pool Summary seehttps://gov.centrifuge.io/t/untangled-digital-credit-fund/2768
Tinlake Page

Questionnaire

( note: this questionnaire has not been altered. Answers come directly from the Asset Originator )

Company

Please give a brief history of the company and, if applicable, group structure.

Untangled Finance was founded in 2020 by the same team who founded fintech Binkabi, a blockchain based supply chain trading and financing platform since 2017. Whilst Binkabi focuses on providing technology for asset origination, Untangled focuses on distribution of asset portfolios through its digital securitisation platform.

Organization

How many full-time equivalent team members do you have and what do they do?

7 - 4 engineers, CEO, COO, Head of Structuring (0.5) and Chief Economist (0.5).

Have you sold equity? Are you venture funded, if so please describe the previous rounds, money invested, and lead investors.

Untangled is funded by the founders and a number of angel investors.

Is your business sustainably profitable or well funded with sufficient cash runway?

Yes - Untangled is well funded and is revenue generating.

Asset Details

Describe the asset collateral that you seek to finance.

Participation interest in insured promissory notes issued by buyers in exchange for payment of invoices from their suppliers.

Describe your previous track record related to this business proposal.

As above.

What is the average collateral asset size?

$250,000

Describe the risk of the assets you are proposing. How do you evaluate and manage that risk?

TFA are short term, often self-liquidating financing in both domestic and cross border trade. TFA traditionally has a very low default rate

Disclosures

Please describe any conflicts of interest or potential conflicts of interest or any relationship that could compromise or be viewed to compromise the decision making of the company.

None

Are there or have there in the last 10 years, been any criminal, civil, regulatory or administrative proceedings against (i) the Company or any of its principals or (ii) the product in any similar such matters including reparations, arbitrations, and negotiated settlements? If so, please describe.

None

Are there any further disclosures that interested party should be aware of?

None

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Dear Manrui & Untangled, it was nice to see and hear you in community call. Few queries:
(a) Untangled is seeking around 10m DAI debt ceiling from MKD, so does that mean untangled at this point is utilizing centrifuge’s established infrastructure and will not be open to investors? Also it is specified, you have blockchain based supply chain trading and financing platform already. So why centrifuge?
(b) What is the assets maturity for which financed is seeked?
(c) Please if you can elaborate more on Green asset securitisation and green bonds issuance as one of the three assets class you are focused on?

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Hi hardik, thanks for the questions.

a) We are running our first pool on Centrifuge for a smaller amount whilst going through Maker’s process. Tinlake | Centrifuge | Decentralized Asset Financing

Centrifuge has existing infrastructure, connections, and legal framework with Maker. We would like to utilise this and focus our resources on what we excel at - work with asset originators, tokenise real world assets and bring them onto the blockchain.

b) Assets are short term loans (30-90 days) that are invoice / revenue based.

c) Due to the complexity, lack of transparency and high costs of green bond issuance, only big enterprises have been issuing green or sustainability linked bonds. Our tokenisation technology, the ability to perform end to end performance tracking and legal automation can reduce cost of issuance significantly and improve transparency. We therefore can help corporates and green asset originators with much smaller portfolio to issue green bonds. We are progressing conversations with a couple of green asset originators. Please refer to our website https://untangled.finance/

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Thanks for your responses @Manrui_Untangled
Considering the fact that the push towards much green technology by every incumbent government of developed country (US and Europe) in particular and developing (Asia Pacific), the potential to target this niche of segment seems quite attractive to plunge in. The requirements for finance for these Renewable Energy is also in much demand in African continent preciously. As I understand, Centrifuge can play a pivot and critical role in coming years if this renewable energy sector is tapped in the ecosystem.

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Absolutely. We look forward to more collaborations with Centrifuge.

Shortage of energy and other vital infrastructure like road has is indeed a big issue for many countries in Africa. This has contributed to inefficiencies in the supply chain (lack of cold chain, unreliable processing) and unfair profit distribution to commodity producers (lack of storage so have to sell at the farm gate, no access to finance). There are many renewable energy initiatives like household solar panels and community solar charging. However it’s hard to ensure physical security of these assets and the roll out is still at a small scale.

The transition to renewable energy is indeed global. Apart from African countries, China, Vietnam and India have made great strides to transform their energy balances from more fossil-based to renewable. Vietnam in particular has more than double its renewable energy capacity in the last 3 years - in fact in 2020, Vietnam installed more renewable energy assets than all other countries in Southeast Asia combined.

Financing renewables brings additional complexities associated with physical assets. There has been a lot of ‘greenwashing’ - projects that claim to be green but indeed are not quite. Other risk dimensions include price risks due to regulation and government subsidies and currency risks due to the fact that most energy consumptions are domestic. We therefore may start with bringing green assets from markets like UK and Europe where there are clear frameworks protecting investors in green assets whilst curating opportunities in other markets.

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Please see response above.

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Nice to see Vietnam leading the way. Is the renewable energy market more dominated by Solar in Vietnam? As far as India is concerned, the renewable energy is dominated by capturing Solar PV System.

Yes I agree. As I understand, the above is primarily related to off-grid solar renewable energy system. The developing countries needs and requires to get free and easy access to this solar system. However, the existing market conditions such as High collateralisation payment against the borrowed loan amount from available financial instrument, limited accessibility to credit finance by local banks, or non-bank credit companies, conflict risk, political uncertainty, an illiquid market, Currency fluctuation, etc adds to complexity. However, the market is ventured by few companies such as M/s BBOXX; M/s ENGIE; M/s Angaza and others.
The crowd funding campaigns are gaining more attraction lately and methods like Pay-as-you-go model as well.
But the point - the potential is huge to tap which needs to be scaled up to the size of USD 40+B to ensure universal access by 2030 (quote IRENA).
Would be exciting to see if this is captured in Centrifuge ecosystem. May be ‘Project Financing’ can be viewed in long term.

Overall nice to hear your view and sharing posts. Let see when this green markets gets captured.

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@hardik you correctly identified many risks associated with green investments despite the huge potential. I am sure you also know that the risks are not the same among emerging markets. More stable emerging markets like Vietnam have less of a currency risk problem (although capital controls are still in place). The government there has played a helping hand to encourage investment in renewable energy such as long term PPAs by state owned power companies. But government could be both the help and the curse (when those subsidies/incentives are taken away). The huge growth of the renewable energy generation (start with solar and now wind, including offshore wind) has created strains to a critical infrastructure: the Grid. The state of distributed energy development also varies among markets.

Given your interest and understanding of this market we would welcome opportunities to collaborate. If you are aware of feasible projects please do refer those to us. Looking forward.

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Yeah sure will notify. Not sure which geographic region you guys might be interested in exploring?

As a quick one, the one specified above M/s Engie does explore in Off Gird Renewable fields. They also have partnership with Energy Web Chain (EWC), a dominant player in energy blockchain, to decentralized and provide energy access to African continent & wider geography. Also @centrifuge can collaborate with EWC and explore such AO’s/project financing, thus encouraging sustainable development and hence minimizing carbon footprints. Further, providing a platform of tokenizing Renewable Energy Certificate (REC) and leverage it will be additional advantages something similar to P-REC stuff by Microsoft in DRC.
M/s Bboxx is leading as well.
UNDP is working towards Sustainable Development Goals (SDG) Financial solutions, might be worth doing some research around it.

The scope is wide enough and needs to narrow down initially before huge move front.

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We are interested in any assets that are are income generating. At the moment we are not financing development/construction. If tokenised REC can be used as collateral for senior debt financing we will look into that as well. Will be a new asset class in its own right.

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