Addem Capital Borrower Profile

Borrower Name: Addem Capital :rocket:

I. Summary:

Addem Capital group has developed a three-entity approach to increase liquidity in the LATAM capital markets, acting as scouts, funders, and monitoring agents within five verticals: fintech, real estate, energy, agriculture/sustainable foods, and healthcare.

  • Addem Capital (Fund) – Through Addem, we underwrite and fund structured debt facilities for asset originators. We provide the entire mezzanine position and up to 1/3 of the senior debt tranche available on each facility, reaching up to 50% funding volume on each credit line. Each debt facility is set to i) enable co-investments and ii) be sold to other institutional investors (secondary market) with a premium once its performance has been proven.

  • Latus (Boutique Consulting Firm) – Through Latus, we help companies within the mentioned verticals that fall under our scope of interest to structure and successfully fund capital and debt vehicles. This allows us to enhance our investment process by working and extracting valuable data from companies that are not yet ready for institutional funding or fall outside our investment thesis.

  • Master Servicer – With our master servicer, we can monitor, and service complex debt structures developed by Addem, Latus, and potential external sources. The aggregate data and experience gained from each facility serviced helps us improve the robustness of our debt structures and the monitoring processes. The master service will become a separate entity within the group.

As a group, we believe that money will become a commodity in the medium-long term, and financial players such as ourselves will compete with infrastructure rather than extensive checks. Addem Capital aims to become LATAM’s most relevant liquidity provider by eliminating unnecessary debt intermediaries while reaching excellence in our underwriting and servicing processes.

II. Key Highlights:

a. Our fund and our consulting firm have invested and worked in more than five countries, including Mexico, Colombia, Chile, Brazil, and US-based entrepreneurs working in LATAM.

b. We have evaluated and assessed +200 companies seeking financing and originated more than ten regional deals.

c. Our internal control desk has audited +15,000 individual credits underwritten by our portfolio companies and pledged as collateral and source of payment for our debt facilities.

d. After receiving debt from Addem Capital, all our portfolio companies have secured Series A equity rounds with renowned investors such as Accel, Monashees, Y Combinator, Mouro Capital (Santander and SV LATAM).

e. Our three-entity approach enables us to fully service. It monitors ongoing facilities without reducing efforts on scouting new opportunities to consolidate our pipeline and avoiding the reliance on third-party services to properly assess the quality of the asset originators’ underwriting process and the asset itself.

f. In our first year of existence, we were recognized by Catalyst Fund and Brighter as one of the top 100 fintech investors across emerging markets.

III. Who we are:

Pedro Cetina – Co-founder, and Managing Partner: Serial entrepreneur, experienced fintech operator, and investor. Co-founder & former CFO at Mutuo Financiera, a fintech leasing company that provided financing of CNGV converted vehicle, in which we successfully structured and secured a 100 M USD over advance debt facility with a NY-based hedge fund. Mutuo was chosen as the best fintech in LATAM in 2017 by Village Capital, Blackrock, and Paypal. Pedro acts as a Board Member and advisor for several companies within the interest scope of the group.

Adriana del Conde – CTO : Adriana has an actuarial science degree, is a CFA level 3 candidate, and recently concluded an MSC in Big Data and Business Analytics. She has more than five years of experience in executive roles related to technological and financial development in prestigious institutions such as S&P and Luz Capital.

Oscar Durán – Co-founder and Managing Partner: Oscar has a law degree and over 12 years of experience structuring companies’ debt facilities for more than 200M USD. Oscar relies upon previous experiences in GE Capital and other international financial institutions, both as general counsel and chief compliance officer, to ensure all Addem’s transactions are up to international standards.

Monica Ajarrista – COO: Monica is a financier with more than eight years of experience in private equity and family offices. Her leading role was structuring investment funds and originating and administrating investment deals for more than 1Bn USD with institutions such as Artha Capital and Tresalia Capital.

Miguel López – CIO: Experience investing in private debt, venture capital, and the stock market. Previously in charge of fintech investments at ALLVP, one of the largest VC firms in Latin America with three funds totaling +$100M in AUM. Former equity research strategy analyst at UBS covering Latin American markets.

Armando Perez Gea – CRO: Armando has over 40 years of experience as a consultant for medium-sized companies, CIO at NAD Bank and the Bank for Infrastructure, and CStrategy Officer at Bancomer. He has funded more than 400M USD using complex structured financial schemes. He is an economist with a Ph.D. from UCLA with a specialization in finance.

IV. What we do:

Addem Capital is a Mexico-based private debt fund that provides alternative structured debt facilities within the five verticals: fintech, real estate, energy, agro/sustainable foods, and healthcare. We create and fund tailor-made debt facilities, mostly asset-backed, to Latam-based companies with solid management and which are actively contributing to the strengthening of the entrepreneur ecosystem in the region. We focus on companies with a strong technological component and proven track record of originating consistent cash flow-generating assets.

We are focused on structuring debt facilities to fund self-liquidating assets where we have complete traceability and control of all the cash flows pledged as the source of payment, which positions us at the best risk-to-return ratio in Mexico and LATAM. We fund these structures’ senior and mezzanine tranches with an interest rate ranging between 18 - 22% in MXN for unsubordinated lines, and 24 - 35% for subordinated ones.

All the monitoring and revisions on the collateral of the credit facilities are done by our Master Servicer, which through its Internal Control Desk, guarantees that all the performing assets satisfy the eligibility criteria for each facility, which enables us to hold more decision-making power on the line, and be ahead of relevant risks.

V. What have we done?

  • Hard Commitments: MXN 315M / USD 18.8M
    • Hard commitments are existing agreements with exiting Addem clients.
  • Soft Commitments: MXN 484M / USD 27.5M
    • Soft commitments are potential investments with existing Addem clients
  • Target Size Deals: MXN 751M / USD 37.6M
  • Total Investments: MXN 205M / USD 10.3M of which MXN 82.5M / USD 4.1M were invested in fintech
    • Addem’s existing portfolio
  • Number of Loans Pledged as Collateral: 17.86K
    • Individual loans that summed make up for all the collateral throughout our structures
  • Collateral Amount of Pledged Loans: MXN 104M / USD 5.2M
    • Sum of the number of loans pledged as collateral
  • Average Interest Rate: 21%
  • Default: 0%

*USD amounts were calculated using a 20:1 USD/MXN exchange rate

VI. How we do it:

We have positioned ourselves as one of the region’s leading debt funds for early-stage tech companies, making almost all our interactions with potential clients organic through introductions and events.

a. Identifying Investments Opportunities. We leverage our ecosystem of entrepreneurs was built through more than five years of being former entrepreneurs, fund managers, active investors, etc.

b. Analysis & Deal Structuring

c. Term Sheet Signing

d. Due Diligence

e. Investing Committee

f. Funding

Our monitoring process is based on periodical verification with the following tools and methods:

Internal Control Desk: To ensure the quality of the underwriting process, we have developed a methodology to audit origination. Our Control Desk receives all contractual assets and generates periodic reports regarding the inconsistencies behind them. With the help of our framework, the originator can improve their asset quality by having clarity behind their process, guaranteeing the viability of the portfolio, and a correct risk assessment. This process provides:

  • Control over the origination process.
  • Generation of periodical reports and filters the quality of originated assets.
  • Help in minimizing operating errors and improves margins while managing risk.

Data Structure and Validation Process: Our structure is designed to keep track of every asset´s expected cash flows and reconcile this information periodically with the cash flows received on the bank accounts and the mechanics stipulated by the parties on each debt facility. The structure guarantees traceability and control of historical transactions, allowing the stakeholders and managers to audit and analyze all cash flows at different levels within the structure. This process is designed to guarantee the correct contractual data of the asset; the system independently generates the contractual cash flow calendars, relying only on internally generated information and auditing all data provided by the originator.

VII. What should backers expect?

Quarterly reports with key metrics: Stakeholders can accurately depict each financial structure’s relevant information through our dynamic reporting dashboards. The dashboards keep track of relevant metrics such as collateral value, asset performance, covenants, realized and projected returns, etc. The data structure is connected to our BI reports and dashboards. Investors, originators, and portfolio managers can choose who to share this information with. The reports and dashboards aim to show all important metrics such as collateral value, asset performance, covenants, realized and projected returns.

Portfolio Performance: Our team takes different methodological approaches to ensure the underwriting, servicing, and collection processes are being followed consistently under the originator’s risk management and internal control frameworks. As a result of this auditing process, periodical reports are generated with the findings, inconsistencies and opportunities to improve the quality with which assets are generated.

Covenant monitoring and compliance & collateral quality: Assets pledged as collateral for the credit facilities and related to critical metrics and covenants under each debt agreement are included in that structure and validation process. The structure is designed to keep track of every asset´s expected cash flows and reconcile this information periodically with the cash flow received on the bank accounts and the mechanics stipulated by the parties on each debt facility. Its principal objective is to keep track of the portfolio’s performance on an asset-level basis relying on audited data and not on external sources of information.

VIII. Why Goldfinch?

As investors and entrepreneurs, we have experienced the asymmetries in the opportunities available to new companies in emerging markets. Local debt and equity markets are highly inefficient, and on top of the scarce availability of financial products, those available are inadequate and lack quality from a product perspective. Leveraging the power of DeFi Protocols in LATAM will be crucial for empowering financial inclusion.

Since the beginning, the Goldfinch team perfectly understood our asset class and Addem’s value proposition. We could not be more excited to launch Addem-like structures in emerging markets alongside the protocol. Through this partnership with Goldfinch, we aim to increase liquidity in Mexico and Latin America, reducing the gap between LATAM and first-world countries.

IX. What will we bring to the Goldfinch Community?

Taking advantage of all the entities within The Addem Capital Group, we believe we’ll become the go-to partner in the region to help fund, service, and enhance possible deals originated through the protocol.

The Addem Capital group plans on funding $70M USD on the Goldfinch protocol over the next 12 months. We intend to create a frictionless investment process for all parties involved; our objective is to safely connect all the mechanics embedded into the protocol with correctly structured vehicles designed specifically for each local regulation.

We take very seriously our role as ecosystem builders in the region and in the financial markets. We are eager to participate as active members of the Goldfinch community and help improve the protocol going forward, as well as to explore and exchange ideas on how DeFi can help democratize access to financial services across Latin America.