Private Credit

Consumer Health & Wellness Financing I

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Accepting $10,000 - $250,000 investments

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Accepting $10,000 - $250,000 investments

Overview

Invest in a financing facility expected to consist of 4,500+ consumer loans used to pay for products and services at two prominent health & wellness companies.

  • Attractive monthly income: The portfolio of loans is expected to pay monthly income at a target annualized net yield above traditional fixed income
  • Conservative loss assumptions: The portfolio was structured to withstand up to 1.2x historical losses without impacting the target yield and up to 2.2x historical losses cumulative losses before losing principal.
  • Purchased at a discount: ​​Loans are expected to be purchased at a weighted average discount of 16.5% to help enhance principal protection.
  • Diversification: The portfolio is expected to consist of 4,500+ consumer medical loans made by two companies, which helps mitigate concentration risk relative to investing in a single loan.
  • Amortizing loans: The term of the portfolio may be shorter than anticipated given principal prepayments made by consumers from time to time. Notably the weighted average life of the portfolio is expected to be ~30 months based on historical principal prepayment levels.

  • High quality companies: Both companies have a growing consumer base, strong performance track record and good customer reviews with respect to their products/services as well as an established payment history dating back to 2017.

Premise

Investing details

What am I investing in?

  • Yieldstreet partnered with EdgeHill (“Originator”) in a joint venture to provide investors exposure to participation interests in primarily subprime consumer receivables originated through two health & wellness companies.

  • The portfolio is expected to consist of 4,500+ loans with an average size of approximately $3k and a maximum term of 36 months.

  • The two companies were carefully selected by Edgehill and Yieldstreet after passing a stringent due diligence process based on the companies’ revenue growth, origination volume, customer service and performance of underlying loan programs.

  • The investment includes an 8-month investment period, followed by a 36-month amortization period in which principal and interest will be returned to investors as it is paid by the borrowers according to a waterfall.

Investment Strategy

What is the value proposition?

  • The portfolio is expected to be purchased at a discounted price and structured with conservative loss assumptions to help provide downside protection. ​​
  • The loans are expected to be purchased at a weighted average discount of 16.5%.
  • Based on the companies’ historical average cumulative losses of 12%, the portfolio was structured to withstand up to 1.2x historical losses (15% portfolio cumulative losses) without impacting the target return and up to 2.2x historical losses (27% cumulative losses) before impacting principal repayment.
  • The stressed scenario of 2.2x mirrors a deep and prolonged recession in which unemployment reaches and stabilizes at ~9.0% which hasn’t happened since the Global Financial Crisis.
  • While the stated term is 44 months, the weighted average life (WAL) is expected to be ~30 months given the projected prepayments during the amortization period.

Behind the investment

Who is the originator?

  • Founded in 2007, EdgeHill Venture Partners (“EdgeHill”) is a family office/investment firm focused on structured credit and venture investment opportunities primarily in financial services and insurance/healthcare distribution.
  • EdgeHill has backed a variety of companies from early-stage/start-ups to established industry leaders. EdgeHill seeks to provide B2B and/or B2C credit targeting $1M - $200M per investment.
  • Their prior receivable purchases from these health and wellness companies achieved annualized returns in the mid-to-high teens and cumulative net losses of ~10% since 2017.
  • EdgeHill’s portfolio companies include Topgolf, Fast Cash Legal, Select Quote, Virtus, Universal Edge Finance, and others.
  • The loan portfolio is managed by an experienced servicer with a strong track record of developing, managing and servicing point of sale merchant finance programs. Furthermore, the servicer creates and administers finance program yields and credit scorecards providing data analytics related to account performance, delinquencies, and charge-offs.

Market Backdrop

The importance of and reliance on specialty finance firms

  • Specialty finance can be broadly defined as any financing activity that takes place outside the traditional banking system.
  • Following the Global Financial Crisis (2007-2009), banks and larger financial institutions were forced by a combination of market conditions and increased regulations to significantly tighten their lending standards.
  • This financial conservatism has essentially closed off the traditional credit market to many consumers and small businesses, opening the door to specialty finance firms to play a larger role in providing structured finance options to these borrowers.
  • Regulatory reforms designed to strengthen traditional lenders’ balance sheets have caused them to become more conservative and provide less credit to large swaths of the economy, including specialty finance companies.
  • This reduction in capital available to specialty finance companies has created an opportunity for new lenders to step in and provide additional financing to help these companies grow.

Essentials

Please refer the Series Note Supplement for more details regarding the offering.

Capital Structure

Where does Yieldstreet lie in terms of priority?

  • Yieldstreet expects to contribute $10M of equity capitalization in the joint venture, with the remainder contributed by an affiliate of Yieldstreet.

Cash Flow

How do I get paid?

  • Investors are expected to receive monthly distributions of interest payments (net of fees and expenses) received by the joint venture throughout the term of the portfolio.
  • The portfolio of loans are amortizing in nature, as such principal is expected to be repaid during the amortization period.
  • The investment was also structured to align EdgeHill’s interests with investors. EdgeHill is scheduled to receive an ongoing asset management fee based on the outstanding principal balance of the eligible receivables. In addition, the Investment Manager receives a management promote on proceeds after investors are fully repaid their principal and interest.
  • As with any unsecured obligation, payment is dependent on the consumers’ ability to pay their outstanding interest and principal.

Accessibilty

Who is eligible to invest?

  • Eligible investors must verify that they are accredited investors. Please refer to the Series Note Supplement for more information.
  • YS IRA accounts are eligible to invest in this offering.

Exclusive tiered pricing available

  • We are currently offering a management fee reduction to investors that meet a certain investment threshold.
  • Per the adjacent graphic, if an investor allocates $250,000 to the deal they will receive a 0.25% reduction bringing their effective management fee to 1.50% on their entire investment.

Returns & Management fees

Annual management fee

1.75%

Target annual net yield

11%

Schedule

Interest payment schedule

Monthly

Target term

44 months

Structure

Tax document

1099

Offering structure

BPDN

Annual flat expense

0.25%

Slide 1 of 3
  • Returns & Management fees

    Annual management fee

    1.75%

    Target annual net yield

    11%

  • Schedule

    Interest payment schedule

    Monthly

    Target term

    44 months

  • Structure

    Tax document

    1099

    Offering structure

    BPDN

    Annual flat expense

    0.25%

Docs

Content

This offering page describes only certain aspects of the offering ("Offering") of the securities issued by YS ALTNOTES II LLC ("Issuer"). The Offering is made only by means of the Private Placement Memorandum dated January 14, 2022 and the Series Note Supplement relating to the Offering (collectively, the "Offering Documents"). The information on this offering page is a summary of the Offering, does not purport to be complete and should not be considered a part of the Offering Documents, or as incorporated in the Offering Documents by reference or as forming the basis of the Offering. No person has been authorized to give any information or to make any representations other than those contained in the Offering Documents or in any marketing or sales literature issued by the Issuer or Yieldstreet Management, LLC, as adviser thereto, and referred to in the Offering Documents, and, if given or made, such information or representations must not be relied upon. All investors must read the Offering Documents in their entirety prior to investing in the securities.

Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.