We’d like to address some questions from our investor community that we have received regarding our decision to list Sandfield Capital as a Loan Originator, despite it being a relatively early-stage company with financial metrics that reflect this stage of growth. It’s important to note that Sandfield’s financial health does not directly affect the security of the loans available for investment on the Income platform. These loans are structured as bullet loans, repayable after the court case. They are specifically designed to cover litigation-related costs for law firms, with repayment tied primarily to the financial stability of the law firm and the outcome of the litigation process.
A bullet loan is a type of loan in which the principal amount is repaid in full at the end of the loan term rather than through regular instalments over time. During the loan term, only interest payments are typically required.
A key factor ensuring the security of these loans is the comprehensive insurance coverage provided by Accelerant Insurance Europe SA, an insurer with a solid A- (Excellent) rating from AM Best, a globally recognized rating agency. This insurance fully covers the loans, meaning that in the event of the borrower’s default, the insurer will compensate for the full amount owed. Such robust insurance coverage substantially mitigates investor risk, rendering the financial standing of Sandfield Capital irrelevant to the performance of these loans. In addition, because of the additional security measure in place, the advance rate for these loans is 100%, meaning Sandfield retains no residual stake once the loans are funded by Income’s investors. This structure ensures that Sandfield does not rely on its own financial resources to support the loans, as its role is limited to originating and facilitating them.
Furthermore, the structure of Sandfield investments is such that the operational entity Sandfield is separated from the entity holding the claims, i.e. SFC4 (Sandfield´s SPV). SFC4 is a ringfenced entity and thus bankruptcy remote, with the planned purpose that its assets, liabilities, and risks are isolated in case Sandfield as a company has problems. This structure protects the entity’s resources from external claims or the parent company’s failures, reducing risk exposure and safeguarding investors’ investments.
The SFC4, which assigns the claims to Income SPV, only holds the claim and receives payments related to the claims. In the case of repayments from the law firms, the funds flow to the SFC4 and, from there on, to the Income SPV and ultimately to the Income investors. In the case of insurance payments that protect all the claims of Sandfield, the SFC4, as insurance beneficiary, also receives these payments directly from the insurer. In the unlikely event that the operational company Sandfield Capital goes bankrupt, the flow of funds will remain the same, and the investors will not be exposed to problems of the operational company.
The true determinant of loan performance lies with the law firms utilizing the loans. These firms, carefully vetted by Sandfield, repay the loans from litigation proceeds, their own operating funds, or other financial arrangements. The insurance provided by Accelerant Insurance Europe SA serves as a safety net, adding an additional layer of assurance. This dual-level risk management—vetting law firms and full insurance coverage—means that your investments are insulated from any financial instability at Sandfield. This unique arrangement highlights the independent nature of the loan structure from the originator’s financial performance.
By sharing this explanation, we aim to provide you with clarity and reassurance about your investments on our platform. Our commitment to transparency and investor protection remains steadfast, and we continuously refine our processes to ensure a secure and aligned investment experience. If you have further questions or need additional information, please don’t hesitate to contact us. Thank you for your continued trust in Income.
