Hi Centrifuge Community,
@TomdlR and I would firstly like to thank you for hosting us at the Pool Party and to @zaatar for moderating. We hope that it was a meaningful session for the community and gave an understanding of Intero Capital Solutions and the opportunity represented by our proposed liquidity pool.
For the benefit of those who could not attend, and those looking to review some of the material used during the Pool Party, you can download the full presentation using this link -
Intero - Centrifuge Pool Party Presentation
The questions raised in the forum were discussed and addressed at various points during the session, and are summarised as below:
Is there a prospect of raising some portion of the senior financing from existing investors?
In short, yes, we are discussing the senior tranche with our investors as another option for investment, depending on their risk appetite. This would be in addition to any other third-party investments made directly through Centrifuge into the liquidity pool.
Can you please provide more details on the proposed pool structure, including net financing rate and desired advance rate?
The pool structure will be a junior/senior tranche liquidity pool. The net financing rate will be dependent on the cost of funding realised in the pool, but we expect a net financing rate of roughly between 5% & 7%. The advance rate should be between 90% and 100%.
Given you have raised traditional financing in the past, why DeFi now?
DeFi has matured to the point where we believe it is able to support traditional finance products that require a level of availability and stability in order to function. It is now possible to bring real world assets into DeFi to create compelling investment returns that are appropriately collateralized.
How confident are you in your growth plans, is this existing business you would be willing to bring on-chain after the model is proved or prospective business?
We are confident in our growth plans based on our origination channels and our engagement with Buyers (our clients). It is a mix of existing relationships and new originations that will all be brought on-chain once onboarded with Intero.
The range of size ($750,000 to $5,000,000), and rates (12% to 20%) is quite wide. What is the weighted average for both, based on the current portfolio and also the future expected portfolio (considering pipeline)?
We expect the initial portfolio to settle with an average of $2,000,000 at 14%. This is, however, subject to Credit Committee assessment.
How are the larger facilities financed at lower rates assessed, and how is it different or additional to your current credit assessment process?
There is no difference in our approach to assessing risk based on the entity’s size. The final structure of the facility may differ, though, to reflect any corporate complexity etc.
If the range of maturity is 90 to 120 days, why is average maturity 120 days?
We generally offer the trading facility with periods ranging between 90 and 120 days. However, we generally find that 120 days is the preferred tenor to allow the Buyer’s cash flow from trading activities to settle the outstanding transactions.
Do you provide fixed or floating rate facilities?
The facility rate is fixed until there is a reason to adjust it. This would take place during the ongoing review processes and would be based on the commercial strength of the Buyer at that time.
Can you describe where your business comes from? I.e. % inbound referrals, % extension of current facilities, etc.?
Our business originates from: direct relationships with the Buyers (traversing their supply chain); our related company, Malvern Capital Resources; inbound referrals from our network of service providers within the financial sector and industry related to the supply chain. The majority of originations are derived from these channels, assessed by us on a case-by-case basis.
Extensions to current facilities are usually a smaller source of growth as there is always a cap to the size that can be granted based on the strength of the Buyer’s organization and other measures/restrictions such as sector and jurisdiction concentration.
Tell us more about how you actively manage your credit risk portfolio over the lifetime of a facility
We have a holistic approach to managing the credit risk portfolio. This starts during the onboarding process and continues throughout the relationship with the Buyer. This includes but is not limited to: (1) meeting with the Buyer; (2) independent evaluation of the application; (3) 3rd party information such as credit bureaus; (4) financial analysis and modeling; (4) Funder representation at Credit Committee.
Reviews are performed quarterly to monitor the performance of the Buyer and their use of the trading facility, and they undergo a full review on an annual basis. We also, where possible, integrate with the Buyer’s accounting system to obtain a live feed of their business activity.