Chesswood Group Ltd T.CHW

varde forward flow deal

[Nashville35]

similar to deal announced with castlelake in march 2022.  these deals are complex and nuanced so impossible to know all the economics, but basics are that chw sources the loans/leases thru its pawnee and tandem arms and sells tranches of these loans/lease future receivables to varde (hence forward flow).  chw is responsible to servicing the loans to completion.  for this, chw receives fees for origination and servicing (chw may also get additional returns if tranches generate above a certain hurdle return but unknown).   the benefit to chw is that this is off balance sheet funding (uses varde's capital, not its own debt or equity), so it has no impact on leverage calculations, since ownership of the loans/leases is with a third party.   by leveraging existing infrastructure at pawnee and tandem, incremental cost shud be modest, allowing chw to generate incremental profit without capital requirements.  this improves capital returns, and there is no balance sheet risk associated with this new biz line.  there is a limit to how much leverage (debt/equity) any lending firm can take on, limiting the growht of the loan book without raising more equity (and diluting shareholders).  deals like castlelake and varde allow chw to source more and more deals, providing growing industry clout and scale without raising the company's risk profile imo.  also good to get a deal like this done with the uncertain ecomomic backdrop because varde would have done its diligence...

from press release:
"We are pleased to support the growth of Pawnee Leasing and Tandem Finance given their respected positions and long operating history in small-ticket equipment finance," said Aneek Mamik, Partner and Global Head of Financial Services from Varde Partners. "This funding of high quality equipment builds on our leading position in providing asset lending solutions to underserved parts of the economy. Hard asset backed financing provides particularly good downside protection in an uncertain economic environment while allowing us to participate in industries where capex spending remains robust."

[419lornestreet9]

a classic Chestwood press release... no details! this is good news though. Varde is a big name in the financials space.  worth noting that as of Q3, castle lake has purchased 164mm under their agreement (out of 400mm) so we have two agreements underway here.