POP: Supply@ME Capital PLC

Real World Assets Pool Onboarding Proposals (POP)
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POP: Supply@ME Capital PLC

Overview:

  • Business Name: Supply@ME Capital PLC (supplymecapital.com):

    • fintech business listed on UK Main Market (Standard List – ticker: SYME), inventor of the Inventory Monetisation© service;
    • parent company of TradeFlow Capital Management Ltd pte (“TradeFlow”), Registered Fund Management Company regulated by the Monetary Authority of Singapore.

  • Current AUM: approx 60m USD plus 15m USD as leverage

  • $ Volume of Transactions Completed Last 12 months: approx. 450m USD

  • Target Launch Date: End of July 2022. Launch of the first Inventory Monetisation transaction leveraging the issuance of a Non-Fungible Token as proof of identification/ certification of the inventory.

  • Location and Team Size: London, Milan, Singapore. Total team: 40

  • Years in Operation:

    • December 2017, Alessandro Zamboni Alessandro Zamboni | LinkedIn founded Supply@ME s.r.l. (Italian start-up);
    • March 23/03/2020, the Italian start-up has been listed on UK Main Market via a reverse take-over (Supply@ME Capital PLC or “SYME”)
    • July 2021: SYME acquired TradeFlow to expand the current in-transit commodities monetisation facility with the disruptive Inventory (warehoused goods) Monetisation© service, leveraging the blockchain

  • Historical Loan Tape (years) :

    • Investment Grade Rating
    • 3.5 years track record
    • No defaults
    • Trade investment footprint across all continents
    • Real World Economy Investment – Over 26 Commodities Invested
    • Diversified from other Asset classes & away from Private Credit
    • Import/Export of Commodity Assets – Asset Backed Strategy
    • Strategy offers very low volatility of returns

  • Key Professional Partners (legal, accounting, operational, technical, structuring):

SYME, being listed, follows strong policies and procedures regarding its governane and operations. Additionally, the Company is supported by the following partners:

  • Legal:
    • Gatti Pavesi Bianchi Ludovici (GPBL) – Italy
    • Pinsent Masons – UK
  • Accounting: E&Y (accounting advisers for the technical treatment of the Inventory Monetisation© service)
  • Structuring: see Legal Advisers above and specific placing agents (f.i. StormHarbour).

Strategy:

  • Business
    • Describe your business and go to market strategy.
      • What makes your approach unique within your industry?

SYME invented the Inventory Monetisation© service (“IM”).

In particular, IM is an innovative service model, provided by a dedicated Alternative Fund and its vehicles (“Stock Companies”), which allows corporates across the globe to improve their inventory management activities, freeing up extra-value from the goods handled (such as capital locked into the warehouse or referred to an import/ export transaction, efficiencies across the supply chain served or new sales channels).

The IM is a commercial facility for the client (so the corporate doesn’t generate any debt using the IM. Differently the IM improves the business revenue).

The competition analysis doesn’t envisage specific players which provide a similar facility.

The market currently provides inventory financing (and NOT monetisation) solutions (asset based lending, product arrangement financing, …).

* Why are you a good partner for Centrifuge?

As recently announced, SYME has recently signed a strategic alliance with the VeChain Foundations (https://www.supplymecapital.com/wp-content/uploads/2022/06/2022_06_28_Strategic-Alliance-with-VeChain-Foundation.pdf).

This is the first step for SYME on a journey towards further adoption of Web3 and decentralised finance. Given the innovative nature of our product offering, the digital asset world is an ideal provider of funding for our IM.

Centrifuge’s model, bringing real world assets into DeFi aligns very effectively with the Inventory Monetisation© offering.

* How do you differentiate yourself from competitors?

As indicated above, SYME invented the Inventory Monetisation© service (“IM”). The IM is a commercial facility for the client (so the corporate doesn’t generate any debt using the IM. Differently the IM improves the business revenue).

SYME invested over 10m GBP to its unique IP rights made of legal/ accounting methodologies & constructs, inventory analysis methodologies and related software.

The competition analysis doesn’t envisage specific players which provide a similar facility. The market currently provides inventory financing (and NOT monetisation) solutions (asset based lending, product arrangement financing, …).

Finally, this new-normal phase post Covid (just in case, regionalisation of the supply chains and related increase of the inventory levels, risk & resiliency management, …) boosts the request of the IM.

  • How is your entity financed today, what are the current sources of capital:

SYME, being listed and having a great audience considering its unique service model in the market, leveraged the typical facilities which the capital market can offer with reference to start/ scale up businesses:

* Equity: on 27 April 2022, the Company announced a capital enhancement plan of 9m GBP integrally subscribed by a professional investors
* Debt raised: in 2021, the Company announced the issuance of 2 rounds of convertible notes (5,6m GPB + 7m GBP).

  • What is your entity’s revenue/fee model:

    • Origination fees: One off origination fee for joining the platform
    • Target spread: Annual service fee
    • Other: Margin on repurchase of goods by the client company from the Supply@ME StockCo.
    • Revenue streams:
      • Captive” inventory monetisation platform servicing (generated through the use of the Platform to facilitate inventory monetisation transactions and to carry out origination and due diligence services)
      • “White-label” inventory monetisation platform servicing (generated through delivery to Banks and Funds of the use of the Platform following a software as a service model)
      • Investment Advisory fee (generated by TradeFlow in its capacity as investment advisor to the funds)

  • Capital

    • Please explain the source(s) of, and ability to scale, your first-loss junior (TIN) capital in the pool: ?

Each Inventory Monetisation© transaction envisages:

  • a portion (indicatively 5%) of the fees charged by the Stock Company vis-à-vis the Client which shall be allocated as cash reserve (first loss)
  • approx. 16.5% (depending on the VAT treatment in each jurisdiction served) which is actually a refundable VAT credit vis-à-vis the local Tax Authority (f.i. in case the Stock Company has to dispose the inventory owned to third parties and it will lose 100%, the TIN tranche will cover the DROP tranche:
    • 5% as cash reserve
    • plus
    • 16.5% as refundability of the VAT credit accounted by the Stock Company)

Regarding the ability to scale, please note the SYME published its current pipeline of IM transactions which, at the date, is:

  • approx. 200m USD as Clients ready to finalise the onboarding process and sign-off the deal

  • approx. 1.5bn USD of gross pipeline (potential clients interested depending on the capital available to deploy)

    • Please explain the source(s) of, and ability to scale, your senior (DROP) capital in the pool: ?

We expect that the senior (DROP) capital will be raised via dedicated liquidity pools arranged by Centrifuge. On the other hand, we expect that the IR/ PR and marketing activities of SYME (being listed) will indirectly support the capital raise from third-party crypto/ digital assets investors which will be interested to bring the liquidity into the Centrifuge protocol and, accordingly, into the Inventory Monetisation liquidity pools.

  • Capital relationships and how much you will bring through Centrifuge KYC to invest in either senior or junior tranche of your pool: ? Please see the previous responses.

  • DeFi

    • Outline why DeFi is important to your business strategy: ? AZ

Our strategic trajectory envisage the framework below presented.
2022_SYME_Inventory Monetisation Web3

The DEFI platforms are considered key partners in order to raise capital to deploy in our Inventory Monetisation© transactions, considering the huge pipeline available.

  • Articulate why Centrifuge’s community and protocol is a fit for financing: ?

As recently announced, SYME has recently signed a strategic alliance with the VeChain Foundations (https://www.supplymecapital.com/wp-content/uploads/2022/06/2022_06_28_Strategic-Alliance-with-VeChain-Foundation.pdf).

This is the first step for SYME on a journey towards further adoption of Web3 and decentralised finance. Given the innovative nature of our product offering, the digital asset world is an ideal provider of funding for our IM.

Centrifuge’s model, bringing real world assets into DeFi aligns very effectively with the Inventory Monetisation© offering.

Structure: Risk & Terms:

  • Please explain the key risks inherent in this opportunity and asset class:

  • “Unsold” risk​ - Reduction of the inventory marketability value due to commercial issues

    • Mitigant: Before each Inventory Monetisation, the inventory is assessed by Supply@ME analysts and external specialists. Ongoing monitoring is performed through client data analysis to promptly pick up the goods in case of issues with the Client company and manage the inventory disposal policy quickly.

  • Counterparty risk​ - Client company credit risk regarding the payment of the service fee/ monthly repurchases

    • Before each Inventory Monetisation, the credit risk is assessed by Supply@ME analysts and external info-providers (f.r. Moody’s credit risk services);
    • Mitigant: Service fees paid by the Client up-front and off-set by Day 1 proceeds, as well as further structural mitigants as required.

  • Corporate Operational Risk​ - Fraud risk re missing inventory

    • Mitigant: Ongoing monitoring is performed through client data analysis to promptly pick up the goods in case of issues with the Client company and manage the inventory disposal policy quickly. Additionally, as required, periodical physical inspections will be undertaken.

  • Underlying Residual Risk​ - Reduction of the value of inventory due to cat-events

    • Mitigant : All risk insurance with the Supply@ME StockCo as the beneficiary in case of significant catastrophic events.

  • Pool Size & Pipeline:

    • At Launch: €10m to €50m (depending on the liquidity/ capital available)
    • 6 Months after Launch: 100m
    • 12 Months after Launch: 250m
    • Origination Pipeline Details:
      • Jurisdictions: concentration in Italy, UK and UAE
      • Current sectors served: Steel, Machine motors and components, food and beverage (with long shelf lives), Capital Goods, Automobiles and Components
      • Combination of Raw Materials and Finished goods across clients

  • Asset & Rates:

    • Asset Type(s): Warehoused goods related to the several GICS sectors GICS - Global Industry Classification Standard - MSCI, excluding real estate (or sub-sectors without inventories).

    • Average Ticket Size: £2,5 - £50M+.

    • Average Asset Maturity: 18 to 36-months duration

    • Expect Default Rate: N/A – the transaction is a true sale, the Stock Company owns the inventory. Accordingly, in case of early warning/ negative indicators (financial troubles of the Client company, negative commercial performances of the Client company which is not buying back the goods as expected or other issues), the Stock Company is able to sell the goods to the market, achieving returns higher than the typical orderly or forced liquidation amounts recovered in case of asset based lending/ inventory financing transaction.

    • Expected borrowing rate on senior tranche (on-chain): Range depending on the nature of the underlying company and assets (inventory turns, marketability of the goods, …) included (indicatively 4% to 8%. These rates may change depending on the inflation rate).

Expected lending rate to end borrower (off-chain): N/A. The Inventory Monetisation transaction is not a financing product. The Stock Company made up of the various fees included in the revenue section above (indicatively 7% to 15%. These prices may change dependin

TradeFlow Capital Management Ltd pte (“TradeFlow”). Please note that TradeFlow delivers “in-transit monetisation” transactions.

See the note #1.

See the note #1.

8 Likes
2

Thanks for your proposal.

Could you expand more on:

Specifically, what’s the expectation you hold from the Centrifuge Ecosystem on the amount of liquidity that you would expect to come through your Centrifuge Pool?

Even by following the POP process, there is no guarantee of capital for funding a pool. Most of the POPs and Issuers that will be seeking capital through Centrifuge are seeking capital through:

  • Defi Protocols
  • Web3 Treasuries
  • Off-Chain Lenders

And there are a number of other routes to finance the Pool, but I don’t think relying on the Centrifuge Ecosystem to fund this, without some initial guidance or input, will lead to success.

Who (specifically what institutional investors) would you say has shown interest in investing into your Pool on Centrifuge, should you complete this POP process?

Thanks again for all the context and success you’re experiencing.

1 Like
3

Hi, thank you for your message.

Our Inventory Monetisation transactions can be funded also via the traditional routes (securitisation, asset based lenders) and leveraging the Global Inventory Fund (Alternative regulated Fund) we launched recently.

We think that the “token route” could be a complementary funding stream to support our Clients, attracting digital assets investors (retail, family offices, institutionals), accelerating the scalability of our model.

In briefly, we believe on a sort of cross-fertilisation between our multiple funding streams. Accordingly, we do think that, after announcing a first Inventory Monetisation transaction via a dedicated Centrifuge pool, being also our Company listed, we will attract a lot of investors on Centrifuge (an example: just our investors in the listed Company which are thousands).

Hope I replied to your comment.

Best

1 Like
4

Hi Alessandro,

Thank you for your POP submission. I would just like to get some clarification on the funding of the TIN tranche. You write that:

Could you please expand a bit on that (e.g. provide some specific figures, if possible) as it is not entirely clear to me - then it will be easier for the community to score your POP.

And just clarify, you are not planning on funding the DROP tranche yourselves (at least not directly) but try to attract external investors via marketing activities - is that correctly understood?

Thank you.

Orhan

1 Like
5

Hi Orhan,

thank you for your query.

We attach a picture with an example, hope it’s clear.

202_SYME_Inventory Monetisation_example
202_SYME_Inventory Monetisation_example1462×989 35.7 KB

We confirm that we want to attract external investors to subscribe the DROP tranche.

Best

6

The Centrifuge community has reviewed the POP for Supply@ME Capital PLC , based on the 10 criteria, and the result is: :eight: / :ten:.

SCORE

For each criteria, either a :zero: (criteria not met) or :one: (criteria met) will be given.

Below you will find the results of the individual criteria:

Business Years in Operation: :one:
Off-Chain Institutional Investors: :one:
Strong Pipeline: :one:
Volume Originated last 2 years: :one:
Historical Loan Tape: :one:
TIN Tranche: :zero:
DROP Tranche: :zero:
Pool Value at Launch: :one:
Pool Value in 1 Year: :one:
Asset Maturity: :one:

RESULT

:white_check_mark: This proposal meets the threshold of >66% and has passed step 2.

NEXT STEP

Step 3 will be to get a recommendation from the Centrifuge DAO. This will be done within the next 5 days and the result will be published here on the Forum.

If you want to see all the steps of Stage 1 of the POP process, you can check this post here .

7

Hi, I’m not really clear what you mean by “we don’t envisage the TIN tranche”. Currently on Tinlake, all pools have to have a TIN tranche. On POCC, we might be able to do a single tranche but that is still in the works. Can you explain what you mean? Even for current issuers who have a off-chain junior tranche: they still have a TIN tranche, which basically acts like the mezzanine tranche.

8

With a ZERO on TIN Tranche and DROP Tranche, I do not believe this POP has merit to continue.

Yes, the market is growing and it seems this potential Issuer could grow substantially, but the capital stack / partners required to be successful in this moment are missing.

Some more insight into what it may look like for this POP to be successful: [Issuer] POP: Lend East - #9 by ctcunning

9

Hi,

We thought that avoiding a TIN tranche was a semplification for the capital raise.

If not, we can introduce it.

Best

10

I actually don’t think it’s mission critical that the entire TIN (junior tranche) be supported by Supply@Me.

But that take us to the broader question which is connected to the Senior Lender:

What is the capital stack of this Pool shaping up to be at Launch and over the next 12 months?

11

Hi, thank you for your reply.

Below what we disclosed.

  • Pool Size & Pipeline:
    • At Launch: €10m to €50m (depending on the liquidity/ capital available)
    • 6 Months after Launch: 100m
    • 12 Months after Launch: 250m
    • Origination Pipeline Details:
      • Jurisdictions: concentration in Italy, UK and UAE
      • Current sectors served: Steel, Machine motors and components, food and beverage (with long shelf lives), Capital Goods, Automobiles and Components
      • Combination of Raw Materials and Finished goods across clients

Do you think achievable?

Best

12

Thanks for re-disclosing.

I don’t know if it’s achievable, specific to the Pool Size.

It’s unclear what lenders and institutional capital providers you’re actively engaged with, whether they be on-chain or off-chain.

My sense is without that work and effort, preceding this POP, that perhaps this POP should be paused and time should be devoted to the capital raising efforts for your Pool.

13

Hi,

thank you for your reply.

Currently the Inventory Monetisation transations can be funded via our Global Inventory Funds (we copy the investors website, related to the Investment Advisory Company (https://tradeflow.capital/)) and, recently, we announced the alliance with VeChain to deploy the first 10m USD leveragin an NFT issued via VeChainThor (Strategic Alliance with VeChain Foundation - 07:00:03 28 Jun 2022 - SYME News article | London Stock Exchange).

On the other hand, in order to raise capital via Centrifuge, we would need an official launch of a dedicated pool in order to arrange the marketing activities vis-à-vis the Supply@ME’ community (investors in the listed companies, potential investors interested in subscribe the DROP tranche, …).

Best

14

Thanks much for re-surfacing those again.

Are you saying that capital would flow into your Centrifuge Pool via both/either Tradeflow or VeChain partnerships? If so, I think the Centrifuge Community would like to understand their commitment to deploying those funds on the assumption your POP is approved.

I’d like to suggest a language shift:

  • from “in order to raise capital, we need an official launch of dedicated pool”
  • to “in order to launch a pool, we need an official capital structure in place”

The process of progressing through the POP is highly dependent on bringing capital partners to the community.

For example, you can see Blocktower going through a public governance process with MakerDAO here as they approach and consider launching a Centrifuge Pool: BlockTower Credit - Introduction & Arranger Proposal - Collateral Onboarding - The Maker Forum

1 Like
15

Thank you for your reply.

Apologies for the pedestrian question: what’s the value of Centrifuge if you are asking to the issuer to bring also the capital?

Thanks

16

I think there’s a difference between organizations that need capital, versus those that want to transfer their entire asset management / structured credit from off-chain to on-chain. The latter sees the early days of Centrifuge a very small first step, but hold a vision for the entire ecosystem of asset-backed securities moving on-chain.

The latter are bringing the assets, the capital, and the vision for the future, partnering with Centrifuge to execute that vision.

Our documentation is a great place to start, but there’s also some key ideas being proposed here by Blocktower below, that speak to a long-term vision of the future.

17

Thank you for the reply.

We can say that we are positioned in this cluster:

The latter are bringing the assets, the capital, and the vision for the future, partnering with Centrifuge to execute that vision.

That said, apologies for this question, what’s the value brought by Centrifuge?

Best

18

POP Review DCM: HamsaPay

Hi I’m Mike, the Founder of DeFi Capital Markets (“DCM”), an entity in the Centrifuge community that is focused on building the future of decentralized capital markets by onboarding institutional investors, assets and infrastructure to the DeFi ecosystem. Previously I was a core member of the Centrifuge team and we at DCM are currently contributing to the Centrifuge, RWA Market (Aave) and MakerDAO ecosystems. The current, and future, employees of DCM are largely from institutional investment and credit backgrounds and we intend to provide views on proposed pools coming through the POP process. Our views do not amount to financial advice and nothing contained in this post constitutes a solicitation, recommendation or endorsement of any investment. Community members should do their own independent research.

I will reuse my recent macro wrap: Macro conditions have broadly deteriorated across markets as inflation has reached a multi-decade high and has spurred a more aggressive Fed policy. The resultant rise in interest rates has driven a sharp sell-off of global financial assets, crypto being no exception. DeFi liquidity has contracted markedly in the last few months, and recently we have witnessed several large scale insolvencies that have shaken confidence in the sector. As deFi investors retreat and significant swathes of capital are erased from the ecosystem it makes for a notably difficult backdrop to raise new financing. That being said, real-world assets tied to productive cash flows outside the crypto ecosystem offer investors a new avenue to generate yield in a more sustainable fashion. Given the financial conditions, investor appetite for new endeavours is expected to remain limited for the time being, however we are optimistic this could improve once the dust settles and RWAs continue as an emerging trend.

We echo the KF recommendation, having concerns that a lack of capital will remain a constant challenge to succesful launching this pool. The expected senior pricing also looks relatively tight to us given the aforementioned backdrop. Altough we would love to suggest that all process proceed, we don’t currently see merits here at the moment.

19

k/f recommendation: Do not proceed to Pool Party.

As articulated in the quality conversation above, there simply is a lack of capital demand for this POP at this time. More broadly in TradFi it seems that capital is available off-chain, but unable to move on-chain.

Within the on-chain ecosystem, there does not seem to be capital providers willing (or visibly supporting) the initial launch and/or future growth of this POP.

Thanks @alexzambo for the continued dialogue and the application.

20

Thank you for your comments.

To be honest we can’t see how an issuer can bring capital if it has not the opportunity to launch a liquidity pool.

We have a lot of investors interested on investing in digital assets route.

We thought that launching an Inventory Monetisation liquidy pool would have been an opportunity for them.

Please Centrifuge Community let SYME know if it’s possible to structure a liquidity pool or not. Accordingly, we will evaluate other DEFI a opportunities.

All the best

1 Like