Private placement / bespoke structures

When to use this structure

A private placement or bespoke structure is what you use when your deal doesn’t fit a standard template. This is not a compliment or a sign of sophistication. It means higher cost (investors require a premium for complexity), longer timeline (everything is negotiated from scratch), and higher execution risk (fewer precedents to rely on). Use it when you have to, not because you want to.

What makes a structure “bespoke”

Bespoke structures are defined by what they are NOT:

Not broadly syndicated to multiple anonymous investors (like a public ABS or BSL CLO)
Not governed by a standardized template (like LSTA for CLOs or SIFMA for ABS)
Not benchmarked to a deep liquid secondary market

They ARE:

Negotiated bilaterally between one issuer and one (or a small number of) investors
Documented using bespoke legal frameworks drawn from a mix of institutional lending, ABS, and corporate debt conventions
Priced based on a negotiated yield target rather than a bookrunner’s clearing mechanism
Structured around the specific characteristics of a novel or complex asset class that standard templates don’t address well

Use a private placement / bespoke structure when:

Your asset class has no established securitization precedent. Cell tower ABS, music royalty securitizations, data center revenue securitizations, litigation finance structures, and container leases did not have standardized market templates when they first came to market. The pioneer deals were private placements between the issuer and a handful of institutional investors (insurance companies, large credit funds) who did their own bespoke analysis.

Your deal is too complex or concentrated for a public ABS or CLO investor base. A single-asset securitization (SASB) of one large commercial real estate property, a whole business securitization of a franchise chain, or a structured financing of a single large infrastructure asset requires investors who can analyze concentrated credit risk. Public ABS investors generally cannot or will not.

You are a large corporate with investment-grade credit looking for private market financing of specific assets. IG companies often access the private placement market (Rule 144A or directly negotiated with insurance companies under the NAIC’s private placement program) as a lower-cost alternative to public bond issuance for asset-backed notes. Insurance companies are the primary buyers of IG private placements and provide committed capital for 5-30 year terms.

Your deal needs structural features that standard markets won’t accommodate. PIK interest, payment-in-kind during construction periods, non-standard trigger mechanics, unusual servicing structures, or foreign law complications that make a standard ABS approach impossible.

Your deal is a “club” transaction with 2-5 institutional investors. For transactions in the $100M-$500M range, approaching a small number of sophisticated institutional investors for a negotiated private placement is often faster and cheaper than a public or 144A offering.

Insurance company direct placement for rated notes with long duration. Insurance companies are the dominant buyers of long-duration, IG-rated private placement notes. If your deal can support investment-grade ratings and has 10-30 year notes, a direct private placement to insurance companies may provide the lowest long-term cost of capital available.

Do NOT use a bespoke structure when:

A standard structure exists for your asset class and deal size. If you can use a warehouse or term ABS, use it. The bespoke premium (cost, time, complexity) is not worth paying for standardized assets.

You need a quick close. Bespoke structures take 6-18 months for first transactions. There is no market infrastructure to rely on, and everything is built from scratch.

You need a revolving facility. Most private placements are term structures (bullet or amortizing). Bespoke revolving facilities exist but add significant complexity and are harder to document.

Your counterparty requires liquidity. Private placement investors are buy-and-hold. There is no secondary market for bespoke notes.

Your deal size is below $50M. The fixed cost of bespoke legal, structural analysis, and investor relations work is $1-3M. Below $50M, these costs are 2-6% of proceeds, which may exceed the cost savings vs. a simpler structure.

The three main types of bespoke / private placement structures

Type 1: Insurance Company Direct Private Placements (IG-rated, long-duration notes)

Large insurance companies (MetLife, Prudential, PGIM, Pacific Life, Guardian, and others) directly purchase long-duration, investment-grade notes from IG-rated issuers
Typical deal: $50M-$500M of notes rated BBB to AA, 10-25 year term, fixed rate
Asset classes: aircraft, infrastructure, utility assets, whole business securitizations, franchise royalties, cell towers, pipeline revenues
Why insurance companies love this: asset-liability management (long-duration assets match long-duration insurance liabilities), spread premium over public bonds, NAIC private placement designation provides favorable capital treatment

Type 2: Single-Investor Bilateral Deal (credit fund or family office)

A single credit fund or large family office commits to a structured financing for a specific asset or portfolio
Deal size: $20M-$300M
Asset classes: essentially anything (music IP royalties, litigation finance portfolios, esoteric specialty finance, direct real estate structured debt, aircraft)
Pricing: negotiated yield target; credit fund requires 10-18% unlevered returns; family office may accept 7-12%

Type 3: Club Deal (3-5 institutional investors, larger transaction)

$200M-$1B+ transactions too large for a single investor but not appropriate for a public ABS offering
Investors: combination of insurance companies (senior tranches), credit funds (mezzanine), and specialized investors (equity or subordinated notes)
Asset classes: large-scale infrastructure, whole business, large CMBS, container/aircraft portfolios, CLO-adjacent structures

What it will cost you

Private placements cost more than standardized structures in two ways: execution overhead (legal, structuring, advisory) is higher because nothing is templated, and the ongoing yield is higher because investors demand a liquidity and complexity premium.

Execution costs (first transaction)

Cost Item	Range	Notes
Structuring / financial advisor	$250K-$1M+ (or 50-150bps of proceeds)	Advisor designs structure, prepares investor materials, manages investor process; often success-based (only paid on close)
Issuer legal counsel	$300K-$1.5M	More extensive than standard ABS because every provision is negotiated from scratch; expect 2-3x more legal hours than a standard warehouse
Investor legal counsel	$200K-$700K	Typically paid by the issuer in a direct placement; investors may require independent counsel
Rating agency fees (if rated)	$150K-$500K per agency	Bespoke asset classes take longer to rate because agencies have less precedent; fees are at the higher end of the range
Accountant (agreed-upon procedures, audited financials)	$75K-$250K
Third-party appraisal or valuation (asset-heavy deals)	$50K-$200K	Required for infrastructure, real estate, and specialized equipment
Total execution costs	$1M-$4M	On a $200M transaction: 0.5-2.0% of proceeds

Illustrative pricing. See pricing disclaimer.

For comparison: a standard term ABS execution runs $1.5-$3M but scales better. The $3M on a $500M deal = 0.6%; bespoke $3M on a $200M deal = 1.5%.

Ongoing cost: the illiquidity / complexity premium

Private placement investors demand a yield premium over comparable public market alternatives:

Liquidity premium: private placement notes have no secondary market; investors require 20-75bps above comparable public spreads
Complexity premium: novel or esoteric assets require more investor diligence and monitoring effort; investors require 25-100bps above comparable simple-structure alternatives
Information premium: bilateral relationships require more frequent and detailed reporting than public offerings

Indicative pricing by type

Insurance Direct Placement (IG-rated, 10-25 year notes, fixed rate):

AA-rated notes: T + 150-225bps (2024 levels)
A-rated notes: T + 175-275bps
BBB-rated notes: T + 225-375bps
No float; these are fixed rate; the spread is locked at closing for the full term

Credit Fund Single-Investor (unrated or privately rated):

Senior secured (first lien, IG-quality assets): SOFR + 250-450bps
Mezzanine (second lien, sub-IG): SOFR + 500-900bps
Preferred equity / junior notes: SOFR + 900bps+ or 12-20% IRR target

Whole Business Securitization (royalty or franchise, IG-rated):

Senior notes (BB+ to BBB-): SOFR + 300-600bps or fixed T + 250-500bps; depends heavily on asset class, issuer rating, and note term

Worked example: music royalty private placement

Scenario: A music publishing company wants to monetize its back catalogue royalties through a structured note issuance.

Asset: royalty income stream from 5,000 songs; trailing 12-month royalties $12M; expected life 20 years
Desired raise: $80M of notes
Rating obtained: BBB- from Kroll (KBRA)

Structuring:

Senior secured notes: $80M, fixed rate, 10-year term (bullet)
Debt service coverage ratio (DSCR) at issuance: $12M / $6M annual debt service = 2.0x
Credit enhancement: 20% overcollateralization (notes sized at 80% of estimated present value of royalties)
Structural protections: cash trap if DSCR falls below 1.5x; mandatory amortization if DSCR falls below 1.25x

Pricing (placed with 2 insurance companies and 1 credit fund):

Note coupon: 7.25% fixed (T (4.50%) + 275bps)
Comparable public bond at BBB- 10-year: 6.50% (T + 200bps); private placement premium = 75bps

Cost breakdown:

Annual interest cost: $80M × 7.25% = $5.8M/year
Execution costs: financial advisor ($600K) + legal ($800K) + rating ($250K) + accounting ($100K) = $1.75M; amortized over 10 years = $175K/year
Total annual cost of capital: $5.975M on $80M = 7.47% all-in
Comparable public bond all-in: 6.50% + $50K/year amortized execution cost = 6.56% all-in
Bespoke premium vs. public market equivalent: 91bps
Justification: the issuer cannot access public markets at this scale; 91bps is the real cost of being a private market transaction

How long it takes

Budget 12-18 months for a first bespoke transaction. 6-9 months for a repeat with the same investors. The time is dominated by investor education, diligence, and documentation, not by market processes. There is no bookrunner compressing your timeline; everything runs at the pace of bilateral negotiation.

Timeline for a first-time bespoke transaction

Phase 1: Concept and Investor Identification (2-4 months)

Define the asset base and desired structure: what is being financed, for how long, at what priority, with what structural protections?
Engage a financial advisor: advisor maps the structure to the potential investor universe; identifies 5-10 potential investors
Prepare preliminary investor materials: asset description, financial model (base, upside, and stress), management presentation
Begin preliminary investor conversations to gauge appetite, identify primary questions, and understand pricing expectations
Refine structure based on investor feedback

Phase 2: Investor Diligence and Negotiation (3-5 months)

Week	Activity
1-4	Distribute comprehensive information package to shortlisted investors (3-5); answer initial questions
4-8	Investors conduct independent analysis: build their own cash flow models, conduct site visits (for real estate/infrastructure), review legal documents
6-10	Receive indications of interest from investors; compare terms; begin negotiation on structure and pricing
8-12	Credit committee approval at lead investor(s); term sheet signed
12-16	Documentation phase begins

Phase 3: Documentation (2-4 months)

Documentation for bespoke transactions is substantially more complex than standard ABS because there are no standard templates. Every deal section is negotiated from scratch:

Indenture or Note Purchase Agreement (100-300 pages for complex deals)
Asset purchase or security agreement
Servicing agreement
Rating agency engagement and model approval (if rated)
Legal opinions: true sale, perfection, corporate authority, tax treatment (typically 3-6 opinions)
Third-party reports: appraisal, agreed-upon procedures, technical assessment (for infrastructure)

Total timeline (first transaction): 9-18 months from concept to close

Best case (motivated parties, simple structure, experienced team): 9 months
Typical: 12-15 months
Complex or precedent-setting: 15-18 months or longer

Timeline for repeat transactions

Established relationship with insurance company buyer: 4-8 months (credit re-approval, updated diligence, documentation update)
Second issuance under an existing shelf: 6-12 weeks if the shelf registration allows (rare for fully bespoke; more common for 144A shelf programs)
Add-on notes to an existing structure: 8-16 weeks if the indenture permits supplemental notes

What causes delays

Rating agency novelty: if the asset class is new to a rating agency, the analytic process takes significantly longer. Budget 6-12 months for a first-ever rating of a new asset class. The agency needs to develop a methodology, get it approved internally, sometimes publish a Request for Comment, and then apply it to your specific deal.
Multi-jurisdictional legal complexity: international assets, foreign law, cross-border tax issues all require additional legal opinions and add 2-6 months
Investor committee dynamics: a club deal with 4 investors means 4 IC processes, some sequential (one investor’s approval conditioned on a co-investor’s commitment)
SPV setup in foreign jurisdiction: Cayman or Irish SPV adds 4-8 weeks for company formation, KYC/AML clearance, and director appointment

Note: Financial advisors with deep relationships in your specific investor segment (knowing which insurance company’s investment committee is meeting when) compress timelines meaningfully. For a first-time structure, an advisor is almost always worth the fee.

What you’ll negotiate hardest on

In a bilateral negotiation, there is no “market” to anchor to. Every term is what you can negotiate. This is an advantage if you have leverage (scarce asset, strong demand). It is a disadvantage if you need the capital and the investor knows it.

1. Yield / pricing

Bespoke pricing is set by bilateral negotiation, not book-building.

Your leverage comes from:

Alternative sources: if you have a credible alternative (another investor, a different structure), you can negotiate more aggressively. Investors who believe they are your only option will extract maximum yield.
Asset scarcity: if your asset class is scarce and the investor has a mandate to deploy capital in it, you have pricing leverage.
Comparable transactions: build a comp table. Even if direct comps don’t exist, identify structurally similar deals and argue for pricing by analogy. Investors will do the same.

What to concede first: if the investor insists on a higher yield than you want, offer structural concessions first (tighter covenants, additional overcollateralization, higher cash reserve) before raising the yield. A 50bps yield concession on $100M of notes costs you $500K/year for 10 years = $5M present value. The same economic effect achieved through structural concessions may have a lower NPV impact.

2. Structural covenants and financial triggers

DSCR trigger: the most common trigger in infrastructure and royalty-backed deals. Fight hard to set the soft trigger (cash trap) 0.25-0.50x below your base case DSCR, and the hard trigger (mandatory amortization) 0.50-0.75x below. Investors want tight triggers. Negotiate triggers calibrated to your realistic worst-case scenario, not your base case.
Leverage ratio tests: for whole business securitizations, investors push for maximum leverage covenants (e.g., total debt / EBITDA < 6.0x). Understand what these covenants prohibit and whether they constrain your future financing flexibility.
Cash sweep: investors often push for 100% cash sweep (all excess cash above a minimum retention goes to pay down notes). Negotiate a retention basket allowing the issuer to retain some cash for operations and reinvestment. Typical: retain $X per quarter or X% of EBITDA before sweep applies.
Restricted payments covenant: investors will restrict dividends, distributions, and management fees while notes are outstanding. Negotiate permitted payment baskets (management fees up to $X/year, distributions to owners up to Y% of net income if no default exists).

3. Information and reporting requirements

Reporting frequency: insurance companies typically require quarterly financial statements and annual audited financials. Credit funds often want monthly reporting. Negotiate quarterly as the standard with additional ad hoc reporting only for defined trigger events.
Management meeting rights: annual in-person management meetings are reasonable; resist requirements for quarterly in-person meetings or unrestricted access to management on demand.
Site visit rights: for infrastructure, real estate, or asset-heavy deals, investors will require annual inspection rights. Agree to this but negotiate advance notice requirements (at least 30 days) and confirm that ordinary course of business is not disrupted during inspections.
Information confidentiality: confirm that the reporting package is confidential; investors should not share deal-specific information with third parties.

4. Transfer and assignment rights

Can the investor sell the notes? 144A notes can be resold to QIBs. Reg S notes can be sold offshore. Direct private placements may have strict transfer restrictions. Understand your investor’s liquidity needs.
Right of first refusal: negotiate the right that if the investor wants to sell, you have 10 business days to arrange a matched buyer or to repurchase the notes at par + accrued.
Change of control: investors will require a put right (right to demand redemption at 101-105% of par) upon a change of control of the issuer. Negotiate the definition of “change of control” narrowly: require actual transfer of majority control, not just economic changes; exclude internal reorganizations and minority stake sales.

5. Prepayment and call rights

Make-whole call: insurance companies will insist on a make-whole provision for fixed-rate notes: if you call the notes early, you must pay the PV of remaining cash flows discounted at Treasuries + a small spread (typically 25-50bps). In a falling rate environment, this can be extremely expensive. Understand the economic cost before agreeing.
Par call window: negotiate a par call option in the final 1-2 years before maturity (allows refinancing at par without make-whole premium as maturity approaches).
Optional redemption premium: for credit fund notes (floating rate, shorter duration), a standard non-call period (12-24 months) followed by a premium call (102, 101, 100) is more typical than a make-whole. Push for a 12-month non-call period rather than 24 months to preserve refinancing flexibility.
Clean-up call: negotiate the right to redeem outstanding notes when balance falls below 10-15% of original issuance size; avoids an administratively burdensome wind-down of a tiny remaining balance.

Common mistakes

1. Starting without investor conversations. Investing 6-9 months in legal, rating, and structuring work before doing preliminary investor conversations. You may design a structure that no investor will buy at the economics you need, or your preferred structure has a fatal flaw (e.g., unfavorable regulatory treatment for insurance buyers) that would have been identified in 30 minutes with a potential investor. Investor conversations should come before legal work; present a 5-10 page concept to 3-4 potential investors and get preliminary feedback before spending significant money on execution.

2. Giving too much on covenants in exchange for the last 25bps of pricing. Accepting tight financial covenants (aggressive cash sweep, low DSCR trigger, restrictive restricted payments basket) in exchange for saving 25bps on the coupon. 25bps on $100M = $250K/year saved. Restrictive covenants that prevent you from accessing new capital, paying dividends, or managing the business during a temporary downturn can cost multiples of that in opportunity cost or forced asset sales. Model the covenants against your realistic 5-year forward business plan before agreeing.

3. Underestimating documentation complexity for novel asset classes. Applying a standard ABS document set to an asset class it was not designed for (using a consumer ABS indenture for a music royalty deal; using a warehouse agreement for a litigation finance structure). The result: 6-12 additional weeks of documentation, $300K-$700K in additional legal fees, and frustrated investors. Engage specialized counsel with specific experience in your asset class. Ask for deal lists.

4. Failing to account for rating agency novelty timeline. Scheduling a closing 6 months out and assuming the rating process will take 8 weeks. For asset classes new to a rating agency, the first rating can take 6-12 months. The agency needs to develop a methodology, get it approved internally, sometimes publish a Request for Comment, and then apply it to your deal. Begin rating agency conversations in the pre-decision phase and get a realistic timeline estimate directly from the agency.

5. Single-investor concentration risk. Placing 100% of a large ($200M+) private placement with a single investor. If that investor experiences internal constraints (change of investment mandate, regulatory change, personnel change), you have no backup and may need to start the process over. For transactions above $100M, run a club process with at least 2-3 investors. A 3-investor club where each commits to $67M is much safer than a single $200M commitment.

6. No financial advisor for first-time structures. Attempting to run a first-time bespoke transaction without an advisor who knows the investor base. Without an advisor, you are navigating an investor universe you don’t know, negotiating terms without comparable deal knowledge, and managing a complex parallel process (legal, rating, investor conversations, documentation) without experience. The financial advisor fee (50-100bps) is almost always worth it on first-time transactions. Evaluate advisors based on deal lists in your specific asset class, not general reputation.

Your ongoing obligations

Private placement notes are long-dated commitments with bilateral reporting relationships. Unlike public ABS where you file EDGAR reports and that is largely your obligation, a private placement creates an ongoing relationship with a small number of sophisticated investors who will actively monitor the deal.

Reporting obligations

Quarterly:

Quarterly financial statements (income statement, balance sheet, cash flow) for the issuer SPV; typically unaudited but prepared in accordance with GAAP or agreed accounting standards
Covenant compliance certificate: officer certification that no default or event of default exists; confirm compliance with DSCR, leverage, and financial covenants
Asset performance summary: quarterly summary of underlying asset performance (occupancy rates, utilization, collections, defaults, prepayments)
Cash account balances: confirm reserve, debt service, and other required account balances are at required minimums

Annual:

Audited financial statements delivered within 90-120 days of fiscal year end
Annual certificate confirming compliance with all representations, warranties, and covenants
Updated appraisal or valuation (for real estate, infrastructure, or asset-heavy deals); frequency depends on negotiated terms
Rating agency surveillance report distribution (if rated): confirm surveillance fees paid and surveillance process completed

Prompt notification:

Any event of default or potential event of default (BEFORE the cure period expires, not after)
Any material adverse change in the issuer’s business, assets, or financial condition
Any litigation or regulatory action above a specified threshold (typically $1M or 5% of total assets)
Any change in key management (if issuer has key person provisions)
Any proposed material amendment to underlying asset agreements

Maintenance covenants

Financial maintenance:

Maintain DSCR above the maintenance trigger level (measured quarterly based on trailing 12-month cash flow)
Maintain leverage ratio below covenant level
Maintain minimum liquidity (cash and available credit) above specified floor

Asset maintenance:

For real estate/infrastructure: maintain property in good repair; carry required insurance; pay property taxes; comply with environmental law
For IP / royalty assets: maintain and protect intellectual property registrations; prosecute infringement; do not sell or encumber IP except as permitted

Structural maintenance:

Maintain SPV separateness: separate books and records, separate bank accounts, separate management, no commingling
Maintain independent director(s) of the SPV
Maintain required bank accounts (reserve fund, debt service fund) at required minimum balances
Ensure all asset transfers to the SPV remain true sales

Managing the investor relationship

Unlike anonymous public ABS investors, private placement investors are direct counterparties who will ask questions, conduct annual calls, and sometimes request special information.

Annual investor update call or meeting: proactively host an annual call with investors to review performance and address any concerns. Investors who feel informed are more likely to cooperate on waivers or amendments if needed.
Proactive disclosure of emerging issues: if performance is trending toward a trigger (but hasn’t breached it), tell your investors before the quarterly report. A surprised investor is a hostile investor. An investor who learned about a developing problem from you is much more likely to work with you on a solution.
Amendment and waiver requests: the bilateral nature of private placements means you are negotiating with 1-3 investors who know you well. This is generally faster than public ABS amendment (which requires consent from anonymous bondholders). But the investors have leverage because they know your deal and your options.

Important: The investors in a private placement are not passive. They will notice before you do when performance is weakening. Do not wait for a covenant breach to begin a conversation. Proactive communication in the 2-3 quarters before a potential trigger event is the difference between a consensual amendment and a hostile enforcement action.

When to move on

Bespoke structures are not permanent for most issuers. The goal is to build sufficient track record to access standardized, lower-cost capital markets. Know what that path looks like.

When you’ve outgrown the bespoke structure

The asset class has achieved market acceptance: if your asset class (cell towers, solar, music royalties) has grown to the point where multiple issuers have issued publicly and rating agencies have published formal methodologies, the pioneer discount disappears. Subsequent transactions can use standardized documentation and access a much larger investor base at lower spreads.
Track record built: 3-5 years of performance data allows you to approach a rating agency for a public or 144A offering where the data can demonstrate your deal’s safety to a broader investor audience.
Deal size exceeds bilateral capacity: when your financing need exceeds $300-500M per issuance, the bilateral market may not absorb the full amount efficiently. Moving to a 144A offering expands the investor universe and typically improves pricing.

Path to public or 144A market

Step 1: private placement with 1-3 institutional investors; establish deal structure, rating methodology, and legal framework
Step 2: after 12-24 months of performance, approach additional investors with track record data; expand the “club” to 5-10 investors; document a second issuance with refinements from the first
Step 3: 144A offering (Rule 144A exemption from SEC registration; sold to qualified institutional buyers through a bookrunner); access to a much larger investor base; benchmark pricing off public spreads; typically 25-75bps cheaper than direct bilateral
Step 4: registered offering (full SEC registration; public market access; maximum investor base; lowest spreads at scale)

Not every bespoke asset class makes it to Step 4. Cell towers and equipment ABS made it to fully registered public markets. Music royalties and litigation finance remain primarily in Steps 1-2 as of 2024.

When the bespoke structure is the permanent state

Some asset classes will never access public markets at scale because:

The investor base that understands the asset class will always be small (specialized domain knowledge required)
The legal and regulatory complexity prevents standardization (cross-border assets, unique regulatory regimes)
Deal size is inherently limited (single-asset transactions where each deal is unique)

For these, the bespoke private placement is not a stepping stone; it is the permanent capital markets solution. Invest in investor relationships, develop standardized reporting tools, and reduce execution costs on repeat issuances through established relationships and reusable documentation frameworks.

Structural diagram

Practitioner checklist

Before starting (deal viability assessment)

Asset class mapped to investor universe: which investor types buy this? Insurance companies, credit funds, family offices? What do they need?
Preliminary size and yield target: is there a gap between what the asset can support and what investors require?
Rating agency pre-consultation: does a rating agency have an existing methodology for this asset class? If not, how long would methodology development take?
Legal feasibility: can the asset be transferred to an SPV? Is a true sale achievable? Any regulatory restrictions on the transfer or on investor ownership?
Financial advisor identified: who has placed deals in your asset class before? Approach them for preliminary feasibility conversation.
Management bandwidth: private placement execution is a 12-18 month process that consumes significant management time; confirm this is prioritized.

Investor identification and preliminary conversations

Target investor list (minimum 5-8 potential investors) with contact at each institution identified
One-page deal concept prepared: asset description, deal size, expected yield, key structural features, credit case
Preliminary conversations held with at least 3 potential investors before committing to full execution; feedback documented
Pricing range established: what yield range are investors indicating? Is the deal viable at those levels?
Advisor engaged (if using one): signed mandate with defined role, timeline, and fee structure

Structuring and documentation phase

Financial model built: base case, stress case, break-even DSCR; sensitivity to key variables (royalty revenue decline, prepayment, interest rate)
Structure term sheet prepared: note size, coupon, term, structural protections, covenants, transfer rights
Rating agency formal mandate: which agency? Fee quote received; process timeline agreed; preliminary information package submitted
SPV formation: Delaware LLC or Cayman entity? Formation documents filed; registered agent and independent director engaged
Legal counsel engaged: issuer counsel experienced in asset class; confirm they have done comparable deals (ask for deal list)
True sale analysis: preliminary legal opinion confirming asset transfer to SPV is a true sale; identify any legal issues before investor diligence begins
Tax analysis: confirm no entity-level tax on SPV; confirm investor withholding treatment

Investor diligence and negotiation

Information memorandum prepared: 30-50 pages covering asset description, financial model, structural overview, risk factors
Data room established: financial statements, asset documentation, appraisals, legal opinions (preliminary), tax opinions (preliminary)
Investor NDAs signed before distributing non-public information
Lead investor(s) identified: who will anchor the deal and drive documentation negotiation?
Term sheet negotiated and signed with lead investor(s): sets the framework for documentation
Co-investors (if club deal): bring in 1-2 additional investors for remaining allocation; confirm their terms match lead investor terms

Documentation and closing

Indenture or Note Purchase Agreement: major provisions negotiated; review for operational practicality (can you comply with every covenant in the normal course of business?)
Financial covenants tested against financial projections: confirm headroom is adequate under base and stress scenarios
Covenant compliance model built: can test quarterly compliance certificate calculations before closing
Legal opinions confirmed: true sale, non-consolidation, enforceability, U.S. tax, state tax (if applicable)
Trustee and calculation agent agreements executed; operational test of reporting templates completed
Insurance and licensing confirmed: required insurance in place; all licenses and permits current; investor-required endorsements added to insurance policies
Rating received: confirm final rating matches preliminary; any last-minute conditions from agency addressed
Closing checklist completed: all documents executed; SPV accounts funded; reserves at required minimum; collateral perfected

Post-closing operations

Reporting calendar built and distributed: quarterly financial statement dates, annual audit date, compliance certificate dates
Investor contact list current: key contacts at each investor institution for routine reporting and emergency escalation
Annual investor call scheduled: preliminary date set at close; confirm 30 days before each annual call
Monitoring dashboard built: track DSCR, leverage, and key performance metrics in real time; alert system for approaching trigger levels
Amendment and waiver process documented: who has consent authority? What consent thresholds apply? Have the process ready before you need it.