Summary
In order to improve risk management and increase preparedness to protect the overall economic interests of our community, we are proposing that the Goldfinch Foundation (i) retain and reimburse the following consultant to oversee risk management of all Goldfinch-tokenized loans and investments (such consultant, the ”Advisor”) and (ii) grant the Advisor full authority to maximize recovery on behalf of all Goldfinch lenders across all nine (9) borrower pools that are outstanding as of the date of this proposal (collectively, ”Borrowers”). Immediately following the approval of this proposal, this community-retained Advisor will assume the role of an administrative and collateral agent for the Senior Pool, and will coordinate all communications between the community and all Borrowers.
Motivation
Based on the following observations and conclusions, we think it’s critical that the Goldfinch Foundation dedicate resources towards risk management:
- Absence of a centralized risk manager role;
- Inefficiency of individual Backers separately seeking to establish a direct dialogue with their respective Borrower(s);
- Lack of communication from certain Borrowers;
- Inconsistency in reporting quality among Borrowers; and,
- Especially the unprecedented situation with Lend East and Mr. Karan Bhatia, among other reasons.
Specifications and Requirements
By retaining the Advisor, the Senior Pool and Backers (collectively, “Lender”) associated with the Borrowers authorize the Advisor to take such action on such Lender’s behalf and to exercise such powers, rights and remedies under the respective documents by and among Lender and Borrower as are granted to such Lender by the terms thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Advisor may exercise such powers, rights and remedies and perform such duties by or through its agents, sub-agents, employees or attorneys-in-fact. Advisor shall not have, by reason hereof or any of the other documents, a fiduciary relationship in respect of any Lender. Without limiting the foregoing, Advisor is authorized to:
- file any financing or continuation statements or record any documents or instruments in any public office at any time or times or otherwise perfect any security interest for the benefit of Lender and other secured parties;
- monitor and preserve the collateral;
- make information requests to Borrower;
- deliver notices of default and/or event of default to Borrower and negotiate forbearance agreements and waivers in connection therewith; and,
- to the extent available under applicable law and the terms of the documents, take remedial action against Borrower and the collateral such as initiating litigation, conducting foreclosures, and sweeping cash.
In addition, this Advisor will be responsible for providing regular updates to the community, and will serve as the main point of contact for all Lenders regarding actions and remedies related to the Borrowers. Immediately following the approval of this proposal, this community-retained Advisor will be reaching out to the community to establish best practices for all Lender-Borrower communications going forward, including but not limited to how risk updates will be provided.
After having reviewed several proposals from qualified consulting firms and individual consultants, including assessments of experience, costs, and time commitment, among other considerations, we recommend that the Goldfinch Foundation retain the following individual:
- Name: Ajay Gill
- Experience: Mr. Gill is currently advising the special situations team at one of the largest alternative investment firms in the world (with $400+ billion in assets under management), where he is helping to originate deal flow directly from financial sponsors looking for junior capital and other credit-oriented solutions. Previously, Mr. Gill worked as a Partner (U.S. Growth) for Namaste Credit, which is an India-based financial technology startup that utilizes machine learning and artificial intelligence to speed up small business loan processing times. Prior to that, Mr. Gill spent ~8 years at Prospect Capital (with ~$8 billion in assets under management), focusing on originating, executing, and monitoring investments across various strategies including direct lending, broadly syndicated loans, and private equity. Mr. Gill spent a considerable amount of time drafting, editing, and analyzing legal documents. Additionally, his responsibilities included communicating and meeting with the firm’s institutional and retail investors in Prospect Capital funds. Earlier, Mr. Gill spent time as an Analyst in the private equity fund of funds group at Credit Suisse, and as an analyst at Copal Partners where he spent a portion of his time working in the U.K. and India.
The budget will be managed on an hourly basis, subject to a monthly cap as follows:
- Monthly cap: no greater than $30,000 per month in the first three (3) months; thereafter, no greater than $15,000 per month.
- Additional expenses: no greater than $20,000 per month in legal expenses; to the extent the Advisor actually bills less than the aforementioned monthly cap, such unused amounts may be used towards reimbursement of legal or additional advisory or related consulting fees deemed necessary by the Advisor in their reasonable discretionary.
- Initial engagement: six (6) months
Benefits
Having the Advisor in place will allow the community to hold their respective Borrowers accountable to the highest standards, as stipulated in the underlying documents. Community benefits include, but are not limited to, the following:
- Streamline risk management
- Improve communication
- Centralize decision making
Downside
Risk management can be costly; however, in the grand scheme of things, the net return to the community can be significant, especially in light of recent events.
The Advisor might not have the full historical context on all Borrowers. That being said, we will put in our best effort during onboarding to ensure we pass along all critical and other contextual information. We would also encourage all informed community members to do the same in order to set the Advisor up for success.
Voting
“Yes” - The Goldfinch Foundation will retain the Advisor and use Goldfinch treasury funds to compensate the Advisor.
“No” - Do nothing.