[Summary/Discussion] ConsolFreight Series 4

Hi Everyone,

We - the ConsolFreight team - are excited to share here with the community our latest pool on Centrifuge Tinlake. We again financed freight invoices for logistics operations and international trading of goods. Here is the investor summary:

Summary

We are pleased to announce the ConsolFreight Series 4 (“CF4”), representing our offering to gain exposure to cash flows associated with international trading of goods as well as freight forwarding invoices. Consol Freight LLC (“ConsolFreight”) has launched ConsolFreight Pilot LLC (Series 4) (the “Issuer”), a Delaware series limited liability company, which will offer for sale to investors tokens, as described below, corresponding to certain payment obligations owed to the Issuer by various Buyers in connection with international trade transactions and various freight forwarders in connection with factoring and reverse factoring transactions.
The Issuer will issue two tranches of ERC-20 tokens: ConsolFreight Series 4 DROP Tokens with token symbol CF4DRP (“DROP” or the “DROP token(s)”) and ConsolFreight Series 4 TIN token with token symbol CF4TIN (“TIN” or the “TIN token(s)”), which will be offered for sale to investors on the terms described herein and in the Subscription Agreement provided to prospective investors. The DROP token will be a senior token that generates a fixed rate of return when deployed in financings. The TIN token will be a subordinated token that will be subject to the first losses up to their full value. The Issuer will target a 8% APR for DROP (the “DROP APR”) and the ratio of DROP to TIN will have a minimum ratio of 15% TIN. The TIN Tokens will also be purchased by ConsolFreight and Centrifuge to demonstrate their confidence in the asset pool and to act as a buffer against losses to investors in the DROP Tokens.
The Issuer will use Centrifuge, Inc.’s (“Centrifuge”) blockchain protocol system, known as the Tinlake Protocol, to mint the tokens. Issuer’s use of the Tinlake Protocol will be subject to the terms and conditions of that certain Tinlake Protocol Service Agreement, dated as of October 16th, 2020 (the “TPSA”), between the Issuer and Centrifuge.

Participating counterparties

Goods Financing

For this revolving pool, the asset pool will launch with four Buyers that have requirements for international purchasing of goods. The Buyers are existing clients of the Freight Forwarders that took part in the first series, ConsolFreight Series 1 and ConsolFreight Series 2 and/or have received financing through ConsolFreight Series 3.

In this deployment ConsolFreight will partly finance goods aiming an average value of $80,000 USD using the Freight Forwarders as a risk mitigation layer. The Freight Forwarders will have total control of the operation and most importantly they will hold the title of goods (Bill of Lading) on behalf of ConsolFreight. The pool will gradually open up to more Buyers of the ConsolFreight network.

Freight Forwarding Invoices Financing

In addition to financing goods ConsolFreight will finance freight forwarding invoices. The asset pool will launch with Freight Forwarders that are members of the Forward Together Network (collectively, the “Freight Forwarders”). All initially participating Freight Forwarders have received payment advances by ConsolFreight in the previous pools ConsolFreight Series 1, ConsolFreight Series 2 and ConsolFreight Series 3. The pool will gradually open up to more Freight Forwarders of the ConsolFreight network.

Summary of Term

About the Asset Originator

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ConsolFreight is a SaaS freight technology provider that empowers the digital transformation of the shipping industry. The founding team combines 50+ years of experience running successful freight forwarding businesses in the U.S., Latin America, and Europe. Our services expand from offering a marketplace for freight forwarders and procurement of logistics services, to digital contract management solutions for freight forwarders and carriers to trade finance solutions.
The ConsolFreight ecosystem currently counts on several partnerships with renowned freight forwarding networks such as X2 Logistics Networks, Globalink, and has secured more than 600 freight forwarders as exclusive trade lane providers.

Pool Description

For financing international goods trading, the Issuer will acquire a promissory note (commercial invoice) either directly from the Shipper or by assignment from the Buyer. The physical goods will be under the freight forwarders’ custody while being transported, and the title of goods in transit (B/L) will be used as additional collateral to the commercial invoice. The average goods value is $80,000.

For financing freight forwarding invoices, the Issuer will acquire, either directly from the Freight Forwarders or by assignment from ConsolFreight, invoices generated in respect of factoring and reverse factoring transactions with an average invoice size of $7,000.

CF4 will be a revolving pool. Upon repayment by the Borrowers the Issuer will distribute any capital requested for withdrawals and then will redeploy the remainder into new payment advances. CF4 will be open for investment and withdrawal on a regular basis based on the frequency of the Net Asset Value as determined by the Issuer. The total value of the pool is expected to grow steadily.

DROP investors will not receive any payments of principal or interest in respect of any DROP Tokens until such time as the Investor elects to redeem such DROP Tokens. Until such redemption, all amounts payable to the Investor in connection with the DROP Tokens will be either (i) held in cash by the Issuer, free and clear of any liens or encumbrances, or (ii) deployed by the Issuer to fund the generation of new Underlying Assets.

DROP investors may redeem all or a portion of the DROP Tokens by triggering redemption of all or a portion of their DROP Tokens (each, a “Redemption Request”). The Investor may submit no more than one Redemption Request per each specified redemption period (each such period, an “Epoch”).

DROP will generate a fixed return of 8% DROP APR and will be protected by the TIN tranche, which will represent 15% of the pool. ConsolFreight and Centrifuge have agreed to invest in the TIN tranche in order to put skin in the game.

ConsolFreight aims to continuously grow this pool. As the Issuer is able to perform successful origination and showcase a track record of diligent underwriting ConsolFreight considers to lower the TIN ratio gradually to a minimum of 10% over the next six months and to make DROP APR adjustments where necessary to be competitive with market rates. All changes to this Executive Summary will be announced 2 (two) weeks prior to the effective date of the change(s).

The offering will be made available to accredited US investors and international investors through a Reg D and Reg S private placement of the Investment Company Act of 1933. The Issuer intends to utilize Section 506©, which allows for general solicitation of the offering.

Goods Financing

For this deployment we start with a limited number of Buyers and Shippers and will finance goods trading transactions. Transactions eligible for trade financing are brought onto the platform via freight forwarding companies that have established a longstanding relationship with ConsolFreight. With respect to their relationships with freight forwarders, ConsolFreight and the Issuer employ a rigorous due diligence process at the outset of any such relationship that considers the Freight Forwarder’s operational history, and historical accounts receivable performance, as well as background checks and other forms of operational identity verification.

Buyers of the goods seeking financing are required to provide specified documentation that proves an existing relationship between Seller, Buyer and Forwarder and the respective verifiable documentation of a minimum of three previous transactions. This documentation includes all the requirements to process customs clearance at the importing country, provided the applicant is the Buyer, such as commercial invoice, packing list, B/L, certificate of insurance and customs release. Independent third party documentation is retrieved from the Freight Forwarder’s records.

Freight Forwarding Invoices Financing

With respect to their relationships with freight forwarders, ConsolFreight and the Issuer consider the freight forwarder’s operational history, and historical accounts receivable performance, as well as background checks and other forms of operational identity verification. Freight Forwarders seeking financing for factoring or reverse factoring transactions through ConsolFreight are required to upload specified transaction documents to ConsolFreight’s credit analysis system, which assesses the quality of the freight forwarder’s invoices, including customary checks for fraud, liens, corporate authorization and enforceability and possession of required licenses.

The counterparty exposure in respect of the majority of the transactions financed by ConsolFreight is to high quality, global companies which have business relationships with ConsolFreight extending for three or more years.

Payment Summary

Goods Financing

The typical supply chain payment structure flows from the Buyer, who places the order, to the Shipper, who is responsible for manufacturing the goods. The Freight Forwarder is responsible for the operation and international transportation of the goods.

In this trade finance case, the Issuer provides third party financing to advance payments to the Shipper and collects from the Buyer upon goods delivery in the port. In a typical trade finance deal the Issuer’s relationship is with the Buyer. The legal agreement is a sales agreement of the Issuer with the Buyer referring to and including the original purchase order and invoice with and from the Shipper, and the terms of the sale (together trade financing agreements). This ensures the financed goods are property and under sole ownership of the Issuer until full payment including all fees from the Buyer.

Payments in respect of trade financing transactions will be as follows:

  • If the shipper requires a deposit to start production or processing the order, the Buyer should provide the first 20% and the Issuer will match with a 20%, if required. If the shipper requires more than a 40% deposit, the Buyer should provide the remainder of the funds. All funds involved in the transaction should flow through the SPV.
  • After coordinating operations with the Freight Forwarder the Issuer receives the Master Bill of Lading (B/L) upon which the Issuer transfers the remaining financing amount to the Shipper.
  • After the goods has been delivered the Issuer requests payment including all fees from the Buyer

Freight Forwarding Invoices Financing

The typical supply chain payment structure flows from the Shipper, who places the order, to the Freight Forwarder, who is the broker, to the Carrier, who transports the goods to the Consignee.

Shipper → Freight Forwarder → Carrier

Factoring

In a factoring agreement, the Issuer provides third party financing to advance payment to the Freight Forwarder and collects from the Shipper in 30 to 60 days. In a factoring deal, the Issuer’s relationship is with the Supplier (the Freight Forwarder).

Shipper ↔ Issuer ↔ Freight Forwarder

Payments in respect of factoring transactions will be as follows:

  • The Issuer will advance payment including all fees to Freight Forwarders;
  • On due date invoice payments are made by Shippers to the Issuer;
  • The account is owned by the Issuer.

Reverse Factoring

In a reverse factoring agreement, the Issuer provides third party financing that advances payment to Carriers and collects from the Freight Forwarder. In a reverse factoring deal, the Issuer’s relationship is with the Buyer (the Freight Forwarder).

Freight Forwarder ↔ Issuer ↔ Carrier

Payments in respect of reverse factoring transactions will be as follows:

  • The Issuer will advance payment to Carriers;
  • On due date, payments including all fees are made by Freight Forwarders to the Issuer;

The account is owned by the Issuer.


FOR DETAILS PLEASE CONTACT CONSOLFREIGHT.

DISCLAIMER: Nothing contained in this executive summary is to be construed as a solicitation or offer, or recommendation, to buy or sell any interest in any note or other security, or to engage in any other transaction, and the content herein does not constitute, and should not be considered to constitute, an offer of securities. No statement herein made constitutes an offer to sell or a solicitation of an offer to buy a note or other security.

2 Likes

Any idea how long after signing we should expect verification to take? Or the pool is already full?

Do you mean the acceptance of your subscription? That is a manual process and can take the issuer ConsolFreight up to a day. Here is a little guide.
It is an evergreen pool and consistently growing. Check out on the Tinlake DApp what is in the reserve (invested in the pool but not yet used to finance assets) and what is currently financed. You can invest a first time and again and again as often you wish and as long as the maximum reserve is not yet reached.

Thanks Martin, will wait for it to be accepted then.

In terms of the reserve:

  1. I assume this does not accrue interest? How is accrued interest divided between participants in the evergreen pool?

  2. Does the reserve still accrue RAD under the rewards programme or only once it is utilised?

You are right, the DROP APR - as outlined in the Issuer’s Executive Summary - is only accruing interest when actually deployed and used to fiance NFTs but not as long as they stay in the reserve. The NAV is driving the DROP price based on the accrued interest. Radial (RAD) rewards are depending on the number of days DAI is invested in a pool regardless of idle in the reserve or deployed already but need to be at least for 60 days in a pool to qualify (before you can start claiming your Radial rewards).

Great, thanks Martin. One last question (hopefully) - I have been accepted now on securitize/docusign and it says “pending funding” but on Tinlake I don’t see the option to Invest/Redeem, only the old “Get Started” option - any idea what the issue is there? I am connected on my whitelisted address.

can you signup on our slack and ask in channel #tinlake-support ?

It seems you need a @centrifuge.io email in order to join the slack group?

It’s all good, seems it took about an hour or so to update. Now just waiting for the epoch to finish, thanks for the help Martin!

Any idea how long the epochs are btw? So I know when to claim the DROP.

The epoch is usually set at 24hrs, you can see this listed on the “Investment” view of each pool on the left:

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Hey, I have invested in this pool and also claimed my drop tokens. How do I get RAD? You would need my Centrifuge chain address I suppose. I have tried emailing the centrifuge team but haven’t heard back yet. Kindly help.

Thanks.

Hi Marvink, the rewards claim site is not live yet but after the 60 day minimum period has lapsed, you will be able to claim any rewards earned to date. We will make sure to notify you when it goes live. You can already create a Centrifuge chain address.

Thanks, I have already created a centrifuge chain address.

Hello Centrifuge Team,
do you have a sighted date, when the “TIN”-token for the ConsolFreight Series 4-Tinlake pool will be open for investment for individual investors?
Thank you!
Christian

Hi Christian,

Thanks for your question and interest in CF4.
We consider to open TIN for external investors when the pool is more matured and has grown in size. We think, for now, we should do not share the risk of first loss with external investors. Give us a couple of weeks and we come back to you.

Let me know if you have any additional questions.

Regards

Alejandro

1 Like

Hola Alejandro,
Thank you for your reply. It makes sense to wait until the CF4-pool has grown in size. Security is important.
Best regards,
Christian