HOTEL PROJECT FINANCING
Private loan securitization

Wishing to finance a new hotel project, a hotel group consulted with a family office to evaluate its options. But none of the alternatives seemed attractive:
  • A conventional bank loan was considered too expensive.
  • The amount needed – CHF 25 million – was too low to justify a bond issue.
  • Diluting existing shareholders by raising equity capital was not acceptable
Working with GENTWO, however, the company discovered a truly compelling solution: a custom-designed, tradable certificate using its private loan as the underlying asset. Not only did this new approach offer a flexible solution, but it also proved the most cost-effective choice, even for this relatively low amoun

Besides setting up the issuance vehicle and certificate, GENTWO’s services included producing the term sheet that defined the payment terms of the note, as well as the duration, the exact coupon frequency, and interest payments.

The company was thus able to finance its project very efficiently, without any complications. What’s more, the family office was able to offer its clients a new investment vehicle, one that allowed these investors to participate in a propertybacked project with an advantageous return.

“It was a win-win-win: The hotel group got its financing, the family office got the chance to make full use of its network, and the investors got an attractive investment.”
– Toni Barros, Key Account Manager, GENTWO
Securitizing a low-volume loan backed by collateral and enabling this certificate to be sold to multiple investors, is a new and exciting service that GENTWO is offering. In particular, family offices, independent asset managers, and private banks can make full use of the potential of their networks, offering their clients a truly innovative investment solution.

The GENTWO solution: Advantages for borrower & lender

The Gentwo Solution: Advantages for borrower & lender

Setup

The Gentwo Solution: Advantages for borrower & lender

How conventional financing options look to borrowers and investors

How conventional financing options look to borrowers and investors

Interview

Since we could not rely on any reference cases, we had to develop everything from scratch. Here it was the legal setting that took most time.

José Antonio (Toni) Barros
José Antonio (Toni) Barros Key Account Manager, GENTWO


Toni, what were the main drivers for the borrower, the family office, and the investors?
Toni: Each of these stakeholders represented a different need that had to be addressed with a single solution. Thanks to our flexible, straightforward solution, they all got what they were looking for: The borrower received the desired loan at a reasonable price, the family office was able to offer an innovative investment to its network, and the investors were able to earn an interesting return.

What were the challenges with this project?
Toni: The project was new, complex, and extremely wide-ranging. Since we had no precedent that we could refer to and draw upon, we had to develop everything from scratch. The legal framework was especially time-consuming and challenging.

What exactly was your task?
Toni: As the Key Account Manager, I was primarily responsible for structuring the cashflows and creating the term sheet. It was important to retrieve the relevant points from the loan contract in order to coordinate the coupon payments to the investors with the interest payments from the loan. Only with sufficient cash flows from the loan interest would the investors receive their coupons punctually. At the same time, we had to make sure to reconcile the balance sheet of the issuance vehicle

Was there anything you particularly enjoyed about this case?
Toni: Absolutely! It was very motivating to create an investment solution that is on the cutting edge of the financial industry. I especially liked the nature of this financial instrument: instead of creating the usual dependencies, it made synergies possible and allowed all the participants to benefit. A true win-winwin!

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