[Pool] Harbor Trade Credit Series 2

Hello Everyone - we are excited to share the latest pool for Harbor Trade Credit on Centrifuge Tinlake:

Summary

We are pleased to announce Harbor Trade Credit Series 2 (“HTC2”), which represents our second offering to gain exposure to trade payable financing. Harbor Trade Credit LLC (“Harbor”) has launched Series 2 of Harbor Trade Credit Series LLC (the “Issuer”), a Delaware LLC, which will offer for sale to investors tokens, as described below, corresponding to trade payable financing owed to the Issuer.

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. Harbor 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


About the Asset Originator

Harbor is a fintech firm focused on Supply Chain Finance (SCF) and working capital solutions to improve the cash conversion cycle. Harbor’s trade payable financing programs allow for early payments to Suppliers so that Buyers can optimize their own liquidity through trade credit. Harbor’s receivable finance programs accelerate supplier invoices to provide working capital. These programs are administered on Harbor’s proprietary platform, which not only injects liquidity into the supply chain, but it allows for better vendor and procurement management.

Harbor’s proprietary technology platform:

  • Reduces onboarding costs and ensures Supplier participation
  • Simplifies workflows when dealing with small and medium sized Suppliers
  • Enables Vendor Management through Supplier aggregation

Tinlake Track Record

Harbor launched HTC1 in August 2020. The total annualized return for HTC1 is shown in the below charts along with a detailed breakdown.

Performance Detailed Breakdown

Two invoices and shipments were funded under this initial pool. For reference below are details on the trading activity and flow of goods and funds under this program:

  • Funds raised and the pool closed August 19th.
  • The supplier made shipments under two Bills of Lading (August 23 and August 25th)
  • Funds were drawn from the SPV and transferred to supplier upon shipment
  • The payment was due by Snakebyte on October 21st and October 23rd which were paid on due dates.

Background on Founding Team

Bryan Maloney, President & Co-Founder: Domain expert in international trade finance and has held various senior positions with US and European trade finance companies including Tradewind and Stenn International.

Andy Suen, Lead Engineer, Product & Technology: Andy oversees and delivers the company’s fintech platform and products. Prior to entrepreneurship, Andy spent 13 years with HSBC managing technology initiatives in trade finance as the Group Trade and Supply Chain IT Program Lead. Andy holds an MBA degree in Management of Technology and a Bachelor degree in Computing Science from Simon Fraser University.

Joaquín Jiménez Krijgsman, Director of Business Development: Prior to joining Harbor, Joaquin spent 13 years at ING’s commercial banking arm, most recently as director of working capital solutions. He also served as head of supply chain finance, with roles based in Amsterdam and Moscow. Jiménez was also sales director at Capital Chains, an Amsterdam-based consultancy firm that works with corporates, financial institutions and fintech platforms on their SCF arrangements.

Katie Newton, Head of Marketing and Customer Success: Katie Newton is a graduate of Syracuse University with a B.A. in communications. She has held various roles in marketing and sales for the financial services industry most recently for Stenn International. Her focus at Harbor is client acquisition and retention.

Harbor currently has 4 full time staff and 5 part time contractors. Full time staff includes Business Development, product & technology development, structuring and deal execution. Part time staff are DevOps, sales and marketing.

Pool Description

The aggregate value of the assets owned by the Issuer is expected to be 300,000 Dai. HTC2 will be a revolving pool. The first 300,000 will finance Snakebyte invoices, similar to HTC1. However, upon repayment of the invoices and satisfying any Investor withdrawal requests, the Issuer will reinvest the remainder of the proceeds in new invoices 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. The Issuer expects to expand to additional counterparties (buyers) as the pool assets grow.

Participating counterparties

The asset pool will consist of:

  • Buyer (“Buyer”)
    The first Buyer will be SnakeByte Asia, a HK based electronics video gaming accessories company
  • Supplier (“Supplier”)
    Suppliers will be nominated by the Buyer. The first Supplier will be a Chinese manufacturer of video gaming equipment that has a long standing supplier relationship with SnakeByte Asia.
  • Supply Chain Finance Firm (“Harbor” or “Asset Originator”)
    Harbor Trade Credit LLC, a Florida limited liability company
  • Purchasing Vehicle (“Harbor Trade Limited” or “HTL”)
    Harbor Trade Limited is the purchasing vehicle for the purchase orders and invoices between the Buyer and Supplier
  • Financing Vehicle (“Issuer” or “HTC2”)
    Series 2 of Harbor Trade Credit Series LLC, a Delaware limited liability company, purchases invoices from Harbor Trade Limited

Harbor, HTCL, and HTC2 are independent companies with the following Directors:

  • Harbor Trade Credit LLC: Bryan Maloney and Katie Newton
  • Harbor Trade Limited: Katie Newton
  • Harbor Trade Credit Series LLC: Bryan Maloney

Payment Summary

Harbor operates a buyer-driven supply chain finance solution. The Buyer utilizes the Harbor platform to extend payment terms for themselves and pay Suppliers earlier. Payments flow from the Buyer to Harbor to Suppliers.

  1. Harbor Trade Limited (HTL) and Buyer enter into Terms & Conditions of Sale Agreement which governs all purchase activity between Buyer and Harbor.
  2. The Buyer sends a Purchase Order to Harbor, which in turn, sends a Purchase Order to the Supplier. The Supplier’s Purchase Order is for the cost of goods sold whereas the Buyer’s Purchase Order includes a slight mark-up to pay for the cost of the supply chain finance solution.
  3. The Supplier is responsible for delivering the goods to the vessel. The Supplier’s Purchase Order is considered fulfilled upon the delivery of goods and the Supplier will request immediate payment for the full cost of goods.
  4. Once the goods cross the ship’s rail, the title transfers to the Buyer based on industry standard FOB (Free On Board) INCOTERMS (Ts&Cs of Delivery and Handling of Goods). The Buyer is responsible for freight, insurance, and duties if applicable. The ship carrier provides the Buyer with a Bill of Lading, which is a document that acknowledges receipt of cargo for shipping. The Buyer provides Bill of Lading to Harbor as proof of delivery.
  5. Upon proof of delivery, Harbor Trade Limited will issue an invoice (“Buyer Invoice”) to the Buyer and will receive an invoice (“Supplier Invoice”) from the Supplier. Harbor Trade Limited will immediately pay the Supplier Invoice equal to the full cost of goods.
  6. Harbor Trade Limited will enter into a Receivable Purchase Agreement with Issuer, which will purchase the Buyer Invoice on a true sale basis.
  7. Harbor will issue a Notice of Assignment to the Buyer to redirect payment to the Issuer upon due date of the Buyer Invoice. At maturity, the Buyer will pay the outstanding balance of the Buyer Invoice directly to the Issuer.

Credit Underwriting

Harbor and the Issuer’s due diligence process determines the credit quality of their counterparties.

Credit Analysis and metrics:

  • Harbor determines the cash conversion cycle of their Buyer and assesses their ability to service debt based on historical financial statements.
  • Depending on the jurisdiction and size of the Buyer, Harbor uses audited financial statements. When no audit is available Harbor assesses tax return documents for validation of management accounts.
  • Knockout rules: Jurisdiction of debtor, years in business, minimum spend/revenue, industry vertical
  • The key ratios assessed are Debt/Equity ratio, Debt/EBITDA ratio, Debt/Assets ratio, Current Ratio, Cash Ratio, Acid Test Ratio, Gross Margin (%), Net Margin (%), Liability Payback, Debtors days, Creditor days, Stock Turn days, Interest cover
  • Third party credit reports are available to validate qualitative and quantitative information provided by the Buyer. These reports provide insight into payment incident ratings, liens, lawsuits and negative news.

Harbor offers buyer led Supply Chain Finance to accelerate supplier payments while optimizing buyer payables… As a result, Harbor minimizes Supplier invoice fraud by aligning with the Buyer. Harbor has Buyer default risk, which is mitigated by the length of relationship between Buyer and Supplier as well as Harbor’s credit underwriting process on Buyer counterparty risk. The historical industry average Buyer default rate is less than 1%.

Collection Procedures

System Notifications

  1. All Obligor account activity and balances are available on the Harbor Trade dashboard. Additionally, account activity is provided to the Buyer on a weekly basis by email.
  2. For balances coming due, Buyers receive a notification 3 days prior to the due date.
  3. On due date, Buyer receives a notification that payment is due
  4. Buyer receives past due notification 3 days after due date

Technical Arrears

A delinquent payment notification is sent to the Buyer by email and considers “Technical Arrears” to account for due dates that fall on bank holidays or weekends. These are normal delinquencies and are not a result of insolvency or inability to pay.

Insolvency

Harbor considers an Obligor to be in default if payments are not paid within 7 days of the due date. A system notification is sent to the Harbor operations team to manage collection. Phone calls and emails are made to Obligor for collection. If Obligor is unable to pay the full outstanding balances, a formal payment schedule is implemented and documented.

If payment schedule and workout is unsuccessful, Harbor initiates formal collection procedures and exercises legal action. Depending on the size of the claim, the debt can be sold at a discount to face value. 30 days past the due date, Harbor considers the Obligor in default and the asset is written down. Expected recovery rate is 20% for both declared and undeclared insolvency. Formal Bankruptcy is a declared insolvency. As an unsecured creditor, the recovery of outstanding balances is dependent on credit ranking and the receiver process (jurisdiction specific).

Tinlake Risk Scorecard
Harbor has developed a delinquencies and default risk scorecard for Tinlake that instructs the smart contracts to mark down the value of the asset to 80% of its par value on the 7th day past the due date and to 20% of its par value on the 30th day past the due date.

About the Buyer


Snakebyte group is a leading, independent global player in the consumer electronics and video game accessories market. The company was founded in Schwerte, Germany in 1997 and has expanded its global footprint to the US and Asia. Like many video game accessory companies, Snakebyte started its business purchasing readily available products from Chinese factories and selling them to customers in Europe and the US. The business was solely driven by price. In order to diversify and become less dependent on pricing alone, Snakebyte started designing and developing its own products and underlined this ambition with the incorporation of Snakebyte technologies in Hong Kong in 2012.

For 2020 and beyond Snakebyte will put an even stronger focus on the development of its own products, offering more sophisticated, purpose built technology, advanced features and unique designs.

Snakebyte Brands


Snakebyte
Aftermarket gaming accessories for PlayStation, Xbox, Nintendo and PD Gaming.

Ques
Home audio products

Honeycomb Aeronautical
Authentic flight simulation hardware for enthusiasts and flight students.

Pebble Gear
Snakebyte has entered a license agreement with The Walt Disney Company, allowing them to design, manufacture and bring to market Disney branded tablets, accessories and other consumer electronic products. Two kids tablets, Frozen 2 and Toy Story 4-themed, were released in Q1 2020.

GAMESTORE
GAMESTORE is Snakebyte’s own Android based content delivery platform, created in collaboration with Sweden based developer Appland to distribute content on its own platform independently from Google or Apple.

Snakebyte Customers


FOR DETAILS PLEASE CONTACT HARBOR: investors@harbortradecredit.com

DISCLAIMER: Nothing contained in this executive summary is to be construed as a solicitation or offer, or recommendation, to buy or sell any interest in any note or other security, or to engage in any other transaction, and the content herein does not constitute, and should not be considered to constitute, an offer of securities. No statement herein made constitutes an offer to sell or a solicitation of an offer to buy a note or other security.

7 Likes

Snakebyte produces and distributes Honeycomb flight simulator equipment, which is one of the top selling flight simulator equipment manufacturers for Microsoft Flight Simulator. Here is an article from yesterday that says that Microsoft Flight Simulator 2020 is the fastest growing entry in series history with more than 2 million users since its launch Microsoft Flight Simulator 2020 is Fastest Growing Entry in Series History

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Highly impressive product. Check out the Honeycomb Aeronautical video and partnership with Microsoft. The Honeycomb Alpha Flight Controls is the most advanced flight simulation system available to simmers, flight students, and pilots for setup at home and featuring a complete backlit switch panel and ignition switch. It was designed and developed in California by pilots and aerospace engineers to ensure the most realistic flight experience.

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This looks like a really great pool. HTC seems solid as does Snakebyte.

One question I have is about the returns of the HTC1 pool. In the “Performance Detailed Breakdown” section, it states the annualized return for DROP was 9.47% and TIN was 27.97%. However, just below that it states total amount of DAI invested in DROP and TIN, and then the returns for the DROP and TIN tranches. But the numbers don’t add up to 9.47% and 27.97%.

For example, DROP invested = DAI 260,863. DROP returns = DAI 265,264.

If I’m doing my math correctly, that’s only a 1.66% return.

Am I missing something?

Disregard. I realize my error. Repayment was made in 65 days and thus we need to divide annualized returns by 5.xx. :slightly_smiling_face:

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Thank you. Very clear. For those interested in investing, I would suggest to read carefully this userguide

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What’s the estimated returns ?

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HTC is targeting 11% returns for the DROP token.

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