How are investment offerings structured?
Depending on the investment offering, investor capital goes to a newly-formed Special Purpose Vehicle (SPV) or Borrower Payment Dependent Note (BPDN).
Special Purpose Vehicle (SPV)
A SPV, or special purpose vehicle is an investment structure that is technically a subsidiary of the company that created it (Yieldstreet). That means it is reported on a separate balance sheet, has a scope that is just a subset of the parent company’s activities and is financially independent of the parent company and from other SPVs under the parent’s umbrella. Essentially, each investment structured as an SPV is its own limited liability corporation (LLC).
Yieldstreet acts as the managing member of each SPV, which in the simplest terms means we service and distribute the funds and inform investors of any important administrative matters. If any complications arise in the portfolio, Yieldstreet, as managing member, will handle them.
The ownership of an SPV is split among all investors in the offering at a basis corresponding to your contribution to the deal. Similarly, when the borrower starts paying interest it is to the investors on a pro-rata basis on an agreed payment frequency.
For example, if the borrower is raising $100k and you invest $10k in the offering, you will own 10% of the SPV and the underlying loan. If the loan pays 10% interest per year, you will receive $1k in interest for each year that the loan is outstanding.
Borrower Payment Dependent Notes (BPDN)
Borrower Payment Dependent Notes (BPDN) are debt obligations of Yieldstreet that are tied to the performance of a loan made by Yieldstreet. BPDN helps Yieldstreet structure debt transactions more efficiently by allowing for a greater number of investors in a given transaction, and lower minimum investments. For more on BPDN, check out our article here.
Yieldstreet’s BPDN structure does not have the same member limitations as investing directly in an SPV and will permit Yieldstreet to have more than 99 participating investors in BPDN offerings.
For each BPDN offering, a new SPV will be formed as a wholly-owned subsidiary of the BPDN Issuer (i.e. the Issuer will create Series 1 SPV). That SPV exists to fund, acquire and originate a loan with a borrower, or enter into a participation agreement directly with the originator of a loan (such loan or participation, the corresponding asset).
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2 Represents an net annualized return, using an internal rate of return (IRR) methodology, with respect to the matured investments shown in your Portfolio experience, utilizing the effective dates and amounts of subscriptions and distributions to and from the investments, net of management fees and all other expenses charged to the investments.[read more]