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What Is
What It Is
Performance Guarantee Insurance protects businesses from non-payment of their commercial debt or failure to achieve an expected rate of return or projected value on a private equity investment. It makes sure loans are paid and investors are secure in their investments and allows companies to reliably manage the economic, commercial and political risks of trade that are beyond their control.
As important as it is to know what Performance Guarantee Insurance is, it is equally important to know what it is not. Performance Guarantee Insurance is not a substitute for prudent, thoughtful credit management. Sound credit management practices should be the foundation of any credit insurance policy and partnership. Performance Guarantee Insurance goes beyond indemnification and does not replace a company’s credit practices, but rather supplements and enhances the job of a credit professional.
As important as it is to know what Performance Guarantee Insurance is, it is equally important to know what it is not. Performance Guarantee Insurance is not a substitute for prudent, thoughtful credit management. Sound credit management practices should be the foundation of any credit insurance policy and partnership. Performance Guarantee Insurance goes beyond indemnification and does not replace a company’s credit practices, but rather supplements and enhances the job of a credit professional.
What It Is Not
As important as it is to know what Performance Guarantee Insurance is, it is equally important to know what it is not. Performance Guarantee Insurance is not a substitute for prudent, thoughtful credit management. Sound credit management practices should be the foundation of any credit insurance policy and partnership. Performance Guarantee Insurance goes beyond indemnification and does not replace a company’s credit practices, but rather supplements and enhances the job of a credit professional.
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Request Your Brochure
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For borrowers and lenders, for investors and the companies they invest in,
Performance Guarantee Insurance (“PGI”) provides a level of assurance that everyone needs now to reduce performance risk and provide Peace of Mind
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What Are The Benefits of PGI Coverage?
Businesses invest in PGI coverage for a variety of reasons, including:
• Better financing terms
• Reduction in debt reserves
• Protection against non-payment and catastrophic loss
• Improved lender relationship
• Better creditworthiness
• Stabilizes projected revenue streams
• Balance sheet protection
• Flexible insurance structure
• Fully protects the business and the lender
• Fully protects business and investor
• Coverage provided by AA-rated international insurance carriers
• Better financing terms
• Reduction in debt reserves
• Protection against non-payment and catastrophic loss
• Improved lender relationship
• Better creditworthiness
• Stabilizes projected revenue streams
• Balance sheet protection
• Flexible insurance structure
• Fully protects the business and the lender
• Fully protects business and investor
• Coverage provided by AA-rated international insurance carriers
Who Is It For?
PGI is applicable to a broad scope of transactions which may benefit from indemnification of default on a loan, faiure to achieve rate of return or catastrophic loss of revenue.
Businesses:
• Borrowing /Lending $5M - $500M+
• Raising/Investing from $5M -$500M+ in private equity
• Raising money for new/unproven technology or processes
• Raising money for defensible intellectual property in need of credit enhancement
• Who want to improve improve their creditworthiness
• Who want to stabilize projected revenue streams
• Who want to unlock better loan terms
• Who want balance sheet protection
• Raising/Investing from $5M -$500M+ in private equity
• Raising money for new/unproven technology or processes
• Raising money for defensible intellectual property in need of credit enhancement
• Who want to improve improve their creditworthiness
• Who want to stabilize projected revenue streams
• Who want to unlock better loan terms
• Who want balance sheet protection
Lenders:
• Who want to originate more loan business
• Who want to enhance their brand in the market
• Who want to show they care about their customers
• Who want more loan closings
• Who want better quality loans
• Who want to mitigate default risk for existing and future loan portfolios
• Who want to enhance their brand in the market
• Who want to show they care about their customers
• Who want more loan closings
• Who want better quality loans
• Who want to mitigate default risk for existing and future loan portfolios
Private Equity/Venture Capital Investors:
• Who want to insure financial results across a portfolio of companies
• Who want to attract more and higher quality investment opportunities
• Who want to deploy more capital
• Who want to increase the quality of their portfolio
• Who want to hedge their downside risk
• Who want to attract more and higher quality investment opportunities
• Who want to deploy more capital
• Who want to increase the quality of their portfolio
• Who want to hedge their downside risk
Brokers/Strategic Partners:
• Who want a better tool for their business customers
• Who want to grow their referral network
• Who want to attract more deals
• Who want to close more deals
• Who want another revenue source
• Who value an ongoing relationship
• Who want to grow their referral network
• Who want to attract more deals
• Who want to close more deals
• Who want another revenue source
• Who value an ongoing relationship
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Expand Your Financial Strength
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How Does It Work?
Feasibility
- Initial intake of client information
- Feasibility analysis (generally less than 30 days)
- Initial coverage availability assessment
- Preliminary coverage terms and quote provided
Actuarial and Underwriting
- Engage actuarial and underwriting firm
- Of the Macro-Economic and Regulatory Environment
- Of Current Industry Conditions
- Of Construction Risk Factors
- Of Operational Risk Factors
- Of Revenue Risk Factors
- Of Current Assets Valuation
- Of Off-Take Contacts
- Of Supply Chain Contracts
- Of technology processes and each potential failure point
Quote Commitment
- Final coverage terms and premium quote
- Policy terms from 5 to 20 years
- Integration with loan package or investor package
- Verification of coverage availability with lender or investor
Policy Issuance
- Loan or investment closing
- Policy premium paid
- Policy delivered
- Nationally Recognized Statistical Rating Organization (NRSRO) Submission
- NRSRO Investment Grade Rating obtained
- All Necessary Transaction Documentation Prepared
Monitoring
- Proactive monitoring of business
- Identification of increase risk of default
- Risk mitigation measures recommended
- Additional coverage assessments
- Additional coverage available
Claims
- Defined loss occurs
- Critical Mission Consulting, LLC notified by business, lender or investor
- Notice of claim prepared and filed with insurance company
- 60 days or less to receipt of policy benefits
Who Issues The Insurance?
Coverage is provided by S & P Ratings, AA rated, or better, insurance carriers
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Our PGI Program is insurance coverage that insure projected revenue of an enterprise and the implementation of a business process or technology, effectively creating a synthetic financial guarantee. The PGI coverage when used in combination with our proprietary ratings model, structuring capabilities, rating agency relationships, investment banking and legal partners, can deliver clients an investment grade (“BBB” or better) rating for their own debt and/or equity offering.
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The Goal Of Performance Guarantee Insurance
Ultimately, should an unexpected loss occur, revenue not meet projections or valuation not meet targets, the PGI provides indemnification, thus protecting the lender or investor. By maintaining a strong relationship between the business, the lender or investor and the insurer, PGI may be the wisest investment a company can make to ensure its profits, cash flow, and capital are protected.
The ultimate goal of PGI is not simply to indemnify losses incurred from a default, but provide businesses with the support and knowledge they need to avoid foreseeable and unforeseeable losses from the start, enhancing their credit worthiness and increasing their access to the capital they need to thrive.
The ultimate goal of PGI is not simply to indemnify losses incurred from a default, but provide businesses with the support and knowledge they need to avoid foreseeable and unforeseeable losses from the start, enhancing their credit worthiness and increasing their access to the capital they need to thrive.
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Investing In
Performance Guarantee Insurance With Critical Mission Consulting |
The Clarity First Company
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The key to any successful capital raise is having the right information to make informed decisions about risk and how to avoid or minimize losses. Critical Mission Consulting's careful analysis of this information to mitigate downside risk allows companies to present the strongest credit profile to lenders and investors. More importantly, it enables lenders and investors to avoid losses and removes barriers to their deployment of capital. All parties can focus on profitably growing their businesses.
Examples Of Success
Client A - Renewable Energy
Client A needed to refinance existing debt for less costly long-term debt on two Renewable Diesel Plants.
Issue
Client A needed to broaden the potential institutional investor base capable of making a minimum $300M investment. Without an investment grade rating for the plant/enterprise, the Client was having difficulty finding a refinancing partner.
Solution
We applied the PGI program for the benefit of Client A to raise $300M to refinance existing debt and to provide sufficient capital to develop two renewable diesel facilities. As a pre-revenue operation, sources for capital were limited.
The PGI program provided performance umbrella coverage that guaranteed the projected revenue of the two facilities for the next 10 years. Leveraging this coverage and our proprietary ratings model, we were able to secure an investment grade rating on behalf of Client A.
Every aspect of the operation was underwritten including the novel technology that would ultimately drive revenue.
The PGI program provided performance umbrella coverage that guaranteed the projected revenue of the two facilities for the next 10 years. Leveraging this coverage and our proprietary ratings model, we were able to secure an investment grade rating on behalf of Client A.
Every aspect of the operation was underwritten including the novel technology that would ultimately drive revenue.
Result
Client A secured a $300M loan facility at attractive rates as lenders were well protected against the loss of principal and interest.
Client A will sell its debt in the form of "A-" Rated secured bonds for an additional $200M of capital.
Client A will sell its debt in the form of "A-" Rated secured bonds for an additional $200M of capital.
Client B - New Technology
Client B needed to raise capital for a new technology with immense economic value but was unable to convince lenders that projected returns were reliable.
Issue
Lenders were unwilling to fund Client B because of the risk that if the new project and new technology fail to perform as projected, the lender would suffer a significant loss. As a result, lenders were unwilling to fund our client.
Solution
We created a PGI Insurance program which addressed the lender risks associated with the operation of the facility and the technology of Client B's project by guaranteeing a level of production sufficient to meet debt service and by supporting the warranty obligation of the technology provider.
PGI coverage was issued by an S&P AA rated insurance provider. The PGI coverage provides that in the event Client B's quarterly output falls below the required output, defined as the performance level from the project necessary to meet the debt service owed to the Lender, a claim of loss can be made to the insurer.
Lenders recognized the value of Client B with the PGI solution because projected returns were now fully insured and debt service was no longer in question.
PGI coverage was issued by an S&P AA rated insurance provider. The PGI coverage provides that in the event Client B's quarterly output falls below the required output, defined as the performance level from the project necessary to meet the debt service owed to the Lender, a claim of loss can be made to the insurer.
Lenders recognized the value of Client B with the PGI solution because projected returns were now fully insured and debt service was no longer in question.
Result
Client B received $400M of funding.
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