With a new angle on monetizing intellectual property, IP Innovations Financial Services recently scored $28 million in start-up capital from Principal Financial Group, for the purpose of guaranteeing loans secured by IP assets.
IPI intends to line up trades - generally between middle-market lenders, as well as banks, and borrowers with substantial value in IP assets that the lending community doesn't generally consider eligible collateral for secured loans. IPI, however, has worked toward legally isolating the intellectual property such that, in the event of a default, the firm can seize the assets while making the lender whole.
These assets include patents, copyrights, trademarks and other forms of intellectual property, both cash-flowing and dormant. The firm will target a 20% loan-to-value range, stressing the assets through various potential situations and scenarios.
In addition to an insurance-like reserve fund sized in the 10% range, IPI has access to a $25 million letter of credit from PFG. IPI's guarantee should make these loans at least investment grade, the firm noted in an investor/lender presentation.
Commercial loan rates in the target sector price in the range of 200 to 400 basis points over Libor. To IPI, borrowers will pay for the initial asset valuation, a 3% guarantee fee and other closing costs.
Sources at the firm expect to close their first deal imminently, and believe their product will be well received in the loan marketplace. In fact, according to the investor presentation, IPI's loan guarantee concept has been generating interest from institutions starting up investment funds. It's at least imaginable that these loans could end up in securitizations down the line, sources at the firm said, especially given the lender base IPI is targeting (some of whom typically finance through securitization).
"Intellectual property-based loans are a new and exciting opportunity for borrowers and lenders alike," said Keith Bergelt, a senior vice president at IPI. Typically, the firm will work with borrowers that otherwise have limited access to funding.
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