Earlier this year, in February 2020, we have onboarded UK loan originator Triple Dragon to the Debitum platform. As a quick reminder: The London based company, that is in business since 2016, offers flexible funding and working capital solutions for developers and publishers of video games and mobile apps.
The demand and popularity of Triple Dragon loans didn’t take us by surprise, as those assets have been backed by receivables from major tech enterprises such as Google, Apple, Amazon or Facebook. But not only the underlying collateral has been a huge benefit for guaranteeing the safety of Triple Dragon assets, also the buyback guarantee ensured an additional layer of security for our investors.
After having successfully funded nearly 1.5 million Euro with an average interest rate of 8.61%, we are happy to announce that Triple Dragon assets are now coming back to the platform. If that wouldn’t be enough, this time Triple Dragon assets are coming along with yet another layer of safety, for which we have installed an SPV structure.
In this post, we will share with you what an SPV is, how it works, why we have installed it and how you can ultimately benefit from it.
What is an SPV?
SPV is short for special purpose vehicle but can also be called a special purpose entity (SPE). In its essence, an SPV is a subsidiary created by a parent company, mainly to isolate financial risk. This means that even if the parent company goes bankrupt, its legal status as a separate company makes its obligations secure.
In case of Triple Dragon, it means that another LLC entity has been registered under UK law. Although this SPV is 100% owned by Triple Dragon, Debitum co-founder Martins Liberts is one of its directors and therefore has access and control over the subsidiary.
How does it work?
In order to further increase the volume and exposure of Triple Dragon assets on the Debitum platform, we have proposed to establish a special purpose vehicle in the UK, that will act as a dedicated origination entity.
This means that from now on, loans are exclusively originated for Debitum investors and we will obtain extensive monitoring access. As a consequence, we will have full and real-time visibility on the loan book, collateral pool, bank accounts and accounting.
Why we have decided to establish an SPV with Triple Dragon
After we have observed a big interest in Triple Dragon assets by our investors and seeing a flawless loan performance throughout this time, it was clear to us that we wanted to continue this business collaboration and even further increase the exposure on the Debitum platform.
But increasing exposure while maintaining an appropriate level of security, only comes along with more control from our side. That’s why we put the new SPV structure in place, in order to balance better on the risk-return scale.
What are the benefits for investors?
Through this new established SPV entity, Debitum is now in better control over funds that are provided by our investors. In case we observe or notice any issues, we can immediately pause and stop the offer of new loans on the platform.
As the new SPV is fully dedicated to Debitum investors, this means not only further control but an improved mitigation of risks as well. For example, no other debts will appear in this SPV, such as operational costs or salaries. While in some cases there could be a different order of priorities for how liabilities would be paid back, in this case Debitum is the senior debtor and therefore has ultimate pledge on the SPV.
Disclaimer: Investments in financial products are subject to market risk and any investment should only be done with risk capital. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.