Illustrative sizing · $5mm net to Project
What Each Party Gets
The structure pays every counterparty out of the same closing waterfall and the same maturity outcome. No party is compensated at another's expense.
Party economics
Lender
- Principal collateralized 1:1 by U.S. Treasury STRIPS reaching par at year 5.
- Liquidity at any time: claim any fraction of the STRIPS without a default, a consent, or a sale process.
- Cash-neutral taxation — the stated coupon equals 21% of each year's interest income, so net cash to the Lender sums to zero.
- A 20% warrant on the fully diluted capitalisation with nominal strike, retained in full even on a maturity default.
- The founding participation: for investors in the program's first Project, 9% of its Insurance Company cell and of every other first-two-year Project that exits — the unit is Note + Warrant + Policy + founding participation.
- A one-time stop option at the milestone gate if agreed KPIs are missed, retaining half the warrant and half the founding participation.
- Downside floor of 1.00x after-tax (1.02x gross) in the FAIL case, with the warrant retained as a residual option carried at $0.
- Pays its own RIA a fixed annual advisory fee of 0.20% of the amount invested, outside the structure.
Project
- Growth capital with no amortization, no cash sweep, and no financial maintenance covenants.
- A five-year bullet maturity, giving the full term to compound the capital before any repayment.
- Capital advanced in two equal tranches, the second released against KPIs at a test date agreed at closing.
- A 40% cell option on repayment (49% for Projects closing after the program's second anniversary) — the second-largest owner of the post-repayment cell. On an early repayment — the Success Put or a sale — its share is distributed at once in STRIPS, so it receives liquid Treasuries at the moment it refinances.
- Dilution of 20% of the fully diluted capitalisation, fixed at closing, with no ratchet and no repricing.
- No portion of the non-project proceeds is ever property of the Project, so the structure is clean for future lenders.
Insurance Company
- A 0.50% upfront fee for issuing and administering the policy, separate from its cell interest and from the premium.
- Premium income of 5.45¢ per dollar of note face, received at closing as a pure tax prefund and not available as compensation.
- A retained 51% interest in the cell — control of a segregated, bankruptcy-remote vehicle.
- At maturity the cell holds matured, tax-paid U.S. Treasuries equal to note face: a bank-like balance sheet.
- The right to write the next Leading Edge Note's policy or to lend against the matured collateral.
RIA
- Takes no fee and no participation out of the raise.
- Paid by its own clients through a fixed annual advisory fee of 0.20% of the amount invested, set in dollars at inception, unchanged by any claim, stop or success put, and paid outside the structure.
- Manages the Lender's separately managed account.
- Agrees the milestone KPIs with the Project and holds the one-time stop option on its clients' behalf.
- The representative who introduces Lenders is registered with the RIA and paid from its advisory fees.
Custodian and Administrator
- Share the 0.50% custody and administration upfront fee paid at closing.
- The Custodian holds the STRIPS in a segregated account for the Insurance Company cell — held for the cell's benefit, excluded from the Custodian's estate, and never lent or rehypothecated — together with the coupon reserve and the milestone escrow.
- The Administrator moves the cash and assets and keeps the documents: coupon payments, release of the milestone escrow, in-kind delivery of STRIPS on claims, and the distribution at maturity.
- Neither holds any interest in the cell, so both are neutral across every outcome they administer.
Dealer
- Executes the Treasury STRIPS purchase at closing and is paid only through that execution.
- Receives no fee from the raise and holds no cell interest.
- Has no role in custody, claims or escrow release.
- Quoting and mark-making on the paper against the UST comparison as volume develops.
The Insurance Company earns a 0.50% upfront fee for issuing and administering the policy, separate from its 51% retained cell interest and separate from the premium, which is a pure tax prefund and is not available as compensation.
Cell interest values at maturity
Measured on the matured STRIPS at face. The split is fixed at closing by the Project's closing date, measured against the program's first two years of operation. Dollar values are shown for the program's first Project.
| Holder | The first Project | The first Project · value | Other first-two-year Projects | Later Projects |
|---|---|---|---|---|
| Insurance Company — retained interest, not an option | 51% | $21,380,941 | 51% | 51% |
| Project | 40% | $16,769,366 | 40% | 49% |
| Founding investors (the first Project's Lenders) | 9% | $3,773,107 | 9% | — |
| Total — equal to note face | 100% | $41,923,414 | 100% | 100% |
Illustrative example only; all figures are hypothetical. Not an offer, a solicitation, or tax, legal, insurance, or investment advice.
Interests vest only on full repayment of the Note and are distributed in kind — at maturity, or at once on an earlier repayment; forfeited on a maturity default; reduced pro rata by claims, and so halved on the milestone stop. No broker, RIA, Dealer, Custodian or Administrator holds any interest in the cell.
The founding investors
The investors in the program's first Project receive 9% of the cell of every Project closing in the first two years, including their own, paid in full on each one that successfully exits — never prorated for time. At this sizing, each further first-two-year Project of the same size that exits adds about $3,543,243. Investors in later Projects hold no cell share; each Project's own share stays at 40% during the first two years and 49% afterwards.
A financing that capitalizes the next one
A successful financing does more than repay the Lender. The cell emerges holding $41.92mm of matured, tax-paid U.S. Treasuries — a funded, in-place financing vehicle, effectively a bank-like balance sheet, for the Project's future financings. The Insurance Company (51%) controls it and can write the next Leading Edge Note's policy or lend against it, and the Project is its second-largest owner at 40% (49% for later vintages). On an early repayment — the success put or a sale — the Project's share is distributed at once in STRIPS, so it receives liquid Treasuries at the moment it refinances. Each completed deal capitalizes the counterparty for the next one.