Guarantors generate liquidity from leveraging assets within a secure structure
Short-term, leveraged guarantees of 1-3 years enable funder to accept the remaining project completion risk; the funder also accepts many other risks eschewed by more traditional project financiers, such as currency/political risk, technology risk, if any (to support first-of-a-kind breakthrough solutions, for example), as well as management/performance risk once operational. By the time any of these risks are at play, the completion security will have been released.
Guarantors use diverse assets, some distressed, others entirely illiquid, motivating the triple bottom line benefits that they can generate.
To date, we have worked with clients that have used holdings across nearly every asset class, from public equities to more obscure things like nickel wire and US Investment Tax Credits. Not sure if your assets or your client’s assets are usable? Ask us.
Is it safe? In practice, there is no reason to call any guarantee, even in extreme cases of developer fraud. Following a lengthy cure period, if the developer is non-compliant, or the project cannot be completed for some other reason (for example, if the site is unusable), then the guarantor’s securitized position provides step-in rights to either gain ownership of completed project assets as part of restructuring, or the guarantee can be repurposed for a different site or project. Know more