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Launch of revenue entitlement notes as an alternative funding mechanism. Proposed changes to Australian venture capital
PENNAM PARTNERS

Launch of RENts® series

Pennam Partners is bringing a revenue financing instrument to the Australian financial market.  Revenue financing is broadly the injection of capital by investors and in return the investors receive a percentage of the future revenue of the investee firm (which differs from receivables factoring).

The instruments, revenue entitlement notes (RENts®), has been developed to provide investee firms with an alternative funding strategy they can explore with potential investors to raise funding without diluting their equity holders.  Issuing RENts® can be a sound funding strategy for some investee firms and would potentially allow investee firms to raise capital at a lower cost compared to equity raising.  The services to be provided by Pennam Partners are, inter alia:
  • Financial assessment of the investee firm to determine suitability;
  • Design of RENts® funding strategy and instrument structuring;
  • Financial modelling to determine impact and likely return; and
  • Drafting of term sheet and other offer documents.
The RENts® fundraising can also be listed on a stock exchange in accordance with their respective listing rules and securities regulation to help investors achieve liquidity.  This can be done by undertaking a RENts® public offer (Rpo). 
 
The following are the RENts® series that Pennam Partners has launched so far:
  • Corporate RENts® (C.RENts);
  • Energy RENts® (E.RENts);
  • Impact RENts® (I.RENts); and
  • Not for profit RENts® (N.RENts).
More will be added to the RENts® series in due course.
Corporate RENts

Corporate
RENts

The Corporate RENts® will allow revenue generating businesses to raise capital in exchange for a share of their revenue.  This series would generally suit a company that can demonstrate likely future material revenue growth, which can be derived for instance from organic growth or a merger/acquisition play.  Using C.RENts will allow the sponsors to maintain their current stake holdings proportion in the company after the raising. 
Energy RENts

Energy
RENts

Energy projects, which can demonstrate future predictable recurring revenue (usually by securing a power purchase agreement), can use Energy RENts® to finance the substantial front loaded capex associated with the project.  With a direct correlation between the revenue generated per assessed period and the 'coupon' payments, this will minimise the servicing risk of the project and can make the funding offer more attractive to financiers.
Impact RENts

Impact
RENts

Using Impact RENts® to undertake impact investment can be a better fit for socially driven financiers where normal market returns cannot generally be achieved within traditional investment timeframe.  The I.RENts provides an alignment between the financier return target and the investee firm ability to deliver on that return with less financial pressure on the investee firm given the repayments are based on revenue generated rather than being fixed.   
Not for profit RENts

Not for profit
RENts

Using Not for profit RENts® can provide a better alignment between a financier and a not for profit party.  Traditional financing generally does not necessarily suit a not for profit organisation, which can have less than predictable revenue model compared to traditional industries.  The N.RENts series allows not for profits to raise capital with variable repayments aligned to their revenue while the financier can still generate competitive returns.

Proposed changes to the Australian venture capital regime

The Australian Government has released the Venture Australia package (the "Package") as part of its proposed $1 billion investment project, 'A Plan for Australian Jobs'.  Whilst there is general consensus that more actions are needed to improve the dynamic of the Australian venture capital industry, the proposed Package is a welcoming one for the Australian venture capital sector overall, which would be of benefit to the Australian investment ecosystem and ultimately entrepreneurial activities.  

For further details on the proposed changes, refer to our news release.  
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