ABL, pt. II
Asset-based lending (ABL) is different from credit-based lending (CBL). CBL is predicated on the borrower's ability and likelihood to repay. The more uncertain that is, the higher the interest rate. The lender is typically unsecured (no collateral for the loan), but has different rankings in the credit structure. They might be Senior, Junior, Mezzanine, etc. That's just the queue for who gets paid when in bankruptcy (BK). CBLs typically load up their loan documentation with financial covenants that the borrower agrees to meet, like certain levels of EBITDA, current ratio not too far out of whack on the liability side, and so on, to ensure that the company maintains sufficient capability in their financial structure to pay contracted debts.
ABLs have collateral. These loans are predicated on the borrower desiring to keep their bright shiny toy. ABLs go to great lengths to ensure that they have a firm idea of the value of the collateral, and a market in which to dispose of it. This can be anything from ships to railroad cars to power plants to airplanes to cranes to buildings and on and on...
These are the things that are important for the efficient running of our country. There are after-markets where things can be picked up second-hand. We'll lend you a percentage of that item's cost or appraised value (whichever is lower, in our discretion). The higher the loan as a percent of the value (LTV) the higher the interest rate. This is because the owner is putting less skin in the game, increasing the risk that they will default in a crunch we’re trying to help them through.
ABL is well established as a lending alternative. It's like the loan on your car. You pay, everything's hunky-dory. You don't pay, the repo man pays a visit. The lender knows they can resell the car for a certain amount. Hopefully the loan (and the car) isn't underwater.
How does this relate to the space field? Well, you probably couldn't take out a loan on the first reusable spaceship, but as the concept proves itself one can certainly be assured that there will be lenders willing to put a bit of capital at risk against a proven reusable spaceship. Even if the first guy can't make it in the business, there's likely someone behind him with stars in their eyes and a bit of capital to buy a used spacecraft. The first real arms length transaction for a used vessel will help set the market.
Other lending options would be proven reusable components like cargo transport elements. A proven Bigelow hotel that had a proven means of access is another possibility. The main thing is you have to be able to get to it, and you have to know there's an aftermarket. Just make sure you get control of all of the manuals and documentation included in the loan docs. (an important lesson in aircraft lending)
And there's my rub with ESAS. By focusing on transport elements that only NASA can afford to use, instead of using what everyone else is using, we ensure that only a limited number of CEVs will be produced. This guarantees no aftermarket as all units produced will end up in museums, as with the likely fate of the shuttles.
Could a space shuttle orbiter be pawned?…
ABLs have collateral. These loans are predicated on the borrower desiring to keep their bright shiny toy. ABLs go to great lengths to ensure that they have a firm idea of the value of the collateral, and a market in which to dispose of it. This can be anything from ships to railroad cars to power plants to airplanes to cranes to buildings and on and on...
These are the things that are important for the efficient running of our country. There are after-markets where things can be picked up second-hand. We'll lend you a percentage of that item's cost or appraised value (whichever is lower, in our discretion). The higher the loan as a percent of the value (LTV) the higher the interest rate. This is because the owner is putting less skin in the game, increasing the risk that they will default in a crunch we’re trying to help them through.
ABL is well established as a lending alternative. It's like the loan on your car. You pay, everything's hunky-dory. You don't pay, the repo man pays a visit. The lender knows they can resell the car for a certain amount. Hopefully the loan (and the car) isn't underwater.
How does this relate to the space field? Well, you probably couldn't take out a loan on the first reusable spaceship, but as the concept proves itself one can certainly be assured that there will be lenders willing to put a bit of capital at risk against a proven reusable spaceship. Even if the first guy can't make it in the business, there's likely someone behind him with stars in their eyes and a bit of capital to buy a used spacecraft. The first real arms length transaction for a used vessel will help set the market.
Other lending options would be proven reusable components like cargo transport elements. A proven Bigelow hotel that had a proven means of access is another possibility. The main thing is you have to be able to get to it, and you have to know there's an aftermarket. Just make sure you get control of all of the manuals and documentation included in the loan docs. (an important lesson in aircraft lending)
And there's my rub with ESAS. By focusing on transport elements that only NASA can afford to use, instead of using what everyone else is using, we ensure that only a limited number of CEVs will be produced. This guarantees no aftermarket as all units produced will end up in museums, as with the likely fate of the shuttles.
Could a space shuttle orbiter be pawned?…
posted by murphydyne at 7:33 PM
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