Collateral
Project funding through the institutional channel runs on bankable collateral, and it does not require the sponsor to hold it. Every sponsor stands in one of four positions in relation to it. Only position A asks you to own anything; in positions B, C and D a corporation that gains from the project brings the collateral.
Four positions in relation to collateral
| Your position | Route | |
|---|---|---|
| A | You hold the collateral. | Confirm it against the forms and floor below, then send the documentation for review. |
| B | You have a relationship with a collateral holder. | Bring the holder into the transaction as collateral provider. |
| C | You have the skills to build relationships with collateral holders. | Approach the corporations that gain from the project, using the provider terms set out below. |
| D | You want Magister Operis to facilitate the relationship. | Retain Magister Operis to open and facilitate the relationship with the identified provider. |
Magister Operis rapidly identifies the potential collateral providers for a given project. Either a relationship with them already exists (B), or it does not. If it does not, you build it yourself (C) or retain Magister Operis to facilitate it (D).
Floor and capacity
| Minimum: a project you bring | $150 million in bankable collateral. Below that floor, the institutional cost stack cannot be efficiently structured. |
| Minimum: Tires to Carbon and Municipal Waste | $20 million in cash. Otherwise, a $150 million Standby Letter of Credit (SBLC) issued by a top-tier bank. No other form qualifies for these two programs. |
| Capacity per project | Up to $4 billion initially for qualifying projects. Projects to $20 billion are funded by repeating the same program. Structure, sequencing and terms are documented in the SPV operating agreement and negotiated bilaterally between the funder and the UBO of the collateral and/or their counsel. |
| Projects under $150 million | Packaged within funding transactions carrying at least $150 million in collateral. |
Acceptable forms of bankable collateral
- Cash (the funder can securitize cash with top-rated securities, eliminating risk for the cash owner)
- Standby Letters of Credit (SBLCs) / Bank Guarantees (BGs) issued by an A-rated investment bank in the USA, Canada, the EU, Singapore, South Korea or Japan
- Listed securities, including Medium Term Notes (MTNs), treasuries and petro bonds
- Gold and other precious metals, assayed and under bank or Swiss Safe Keeping Receipt (SKR). Metal that is not already recently hallmarked bullion can be delivered to a refinery in Switzerland, then placed under SKR with a top Swiss bank. The institutional partner can then help arrange an SBLC around that metal, for project funding and/or investment. Owners: see Gold, Precious Metals and Stones.
- Gemstones, GIA-grade certified, generally held under SKR in Switzerland and carrying an insurance wrap. Expect a loan-to-value of 50% or less. To meet the $150 million floor, stones will typically need an appraisal of at least $300 million; the higher the appraisal, the stronger the file.
- Audited real estate equity in jurisdictions with strong municipal property controls. Real estate in Africa is generally not accepted by the top global banks. It may well be bankable with a local bank; the top global banks lend only where, on default, they can rely on a systematic municipal and legal process to enforce their security.
- Audited business equity
- Corporate Medium Term Notes (MTNs) backed by strong collateral
- Sovereign guarantees issued by a government central bank
A — You hold the collateral
- Confirm the asset appears among the forms above and meets the applicable minimum.
- Send the documentation you are comfortable sharing for review. Either the file is submittable as it stands and proceeds, or it needs work and a working agreement is proposed.
- The standard the file is measured against: Bank Compliance.
B — You have a relationship with a collateral holder
- The holder becomes the collateral provider. Its collateral is not spent on the project; it is returned free, clear and unencumbered, and the provider holds equity in the project.
- Introduce the holder directly, or outline the relationship to the holder clearly and gather the pre-compliance items.
- Where the holder needs the project presented in its terms, Magister Operis can prepare that presentation under position D.
C — You have the skills to build those relationships
- Approach national and multinational corporations operating in the host nation: suppliers who want to sell to the project, buyers who want its output, and corporations with social-contract commitments to the nation and its communities.
- Present what the provider receives — see the fictional iron-ore mine below.
- Broker 101 sets out how that approach is made and documented. Consultation time is available by the hour for guidance on a specific approach.
D — Retain Magister Operis to facilitate the relationship
- Magister Operis rapidly identifies the potential collateral providers for the project (suppliers, buyers, and corporations with social-contract commitments) and, on retainer, facilitates the relationship with them on the sponsor’s behalf.
- The work draws on research, communication, professional document production, social media accounts and industry relationships to present the project to prospective collateral providers in terms of what they receive.
- Engagement terms: Engagement Structure.
The Iron-Ore Mine
No collateral of its own. Funded anyway.
A sound iron-ore project, in a host nation that welcomes the investment. The owner has the deposit and the plan, but not $150 million of bankable collateral. Follow where the collateral comes from.
Who can be the collateral provider
| The supplier | The offtake buyer | Both, through an SPV | |
|---|---|---|---|
| Provider | Machinery manufacturer: the seller, vendor and supplier to the mine | Steel manufacturer: the buyer of the mine’s output | Supplier and offtake buyer together, in one special purpose vehicle (SPV) |
| Commercial interest | Sells millions of dollars’ worth of machinery to the mine | Buys millions of dollars’ worth of iron ore from the mine | One sells to the project, the other buys from it |
| Brings | Collateral | Collateral | Collateral, combined in the SPV |
| Receives | Equity in a project whose value is far in excess of the collateral amount | Equity in a project whose value is far in excess of the collateral amount | Equity in the project, held through the SPV |
| Collateral | Returned free, clear and unencumbered; equity retained | Returned free, clear and unencumbered; equity retained | Returned free, clear and unencumbered to each provider; equity retained |
The SPV works the way a group of venture capitalists comes together to fund one venture: several providers combine their collateral behind a single project.
Where to start. Ask why the project needs $150 million, $500 million or a billion. Largely to buy machinery. The world’s major heavy-equipment manufacturers all want to sell you that machinery, and each of them can bring $150 million in collateral on its own. Not every supplier qualifies: a building-supply retailer can stock the project, but it is not the party that brings $150 million in collateral. So begin with two lists:
| List | The fictional iron-ore mine |
|---|---|
| Your suppliers | The major heavy-equipment manufacturers that want to sell you millions of dollars’ worth of excavators, haul trucks and processing plant. |
| Your offtake buyers | Steel manufacturers that want to buy your iron ore. |
Any of them, alone or together, may bring the $150 million in collateral. The logic is common sense; the work is in configuring the transaction so that every party benefits and the funding bank can accept it.
For multinational corporations with a social contract to invest back into a nation and its communities, collateral can raise significant funds for projects without any of the provider’s funds being spent on them.
What your collateral can anchor: The Energy Package — coal, used tires and municipal waste, ready for funding now, with green-hydrogen power next — and the wider set of Flagship Projects, the globally patented, bankable technology deployments an affiliated institution brings to funding.
Initiate a conversation
State which position — A, B, C or D — applies, and write to
Every engagement is governed by the firm's Method and Disclaimer; intermediaries should also review Broker 101 and the firm's Due Diligence standards.