Structural Protections
Built-in mechanisms that mitigate and absorb credit losses before they affect senior investors
Structural protections are the mechanisms built into each Market's design to mitigate and absorb credit losses before they affect senior investors. These protections apply to both originator and trading enterprise Markets.
Tranching & First-Loss
The counterparty retains a junior tranche that absorbs the first losses in any Market, creating a buffer between credit losses and senior investor capital.
The junior tranche is typically sized at 5–20% of the facility, calibrated based on historical loss rates, stress test results, and asset class risk profile. This ensures the originator is motivated to maintain origination quality and servicing performance.
The equity/first-loss position is typically sized at 10–20% of the facility, calibrated based on the enterprise's financial strength, trade flow quality, and counterparty risk. This ensures the enterprise has material skin in the game, aligning incentives with investor outcomes.
Advance Rate Buffers
Advance rates (the percentage of asset value that can be financed) create over-collateralization. An 85% advance rate means the facility is collateralized at approximately 118% of deployed capital. This buffer protects against collection shortfalls, dilution, and asset value deterioration. Typical advance rates for trade receivables on Port range from 80% to 95%.
Advance rates are calibrated based on historical collection performance and dilution rates, obligor credit quality, asset type and tenor, and geographic and currency risk. Rates are set conservatively at structuring and may be adjusted during periodic credit reviews based on actual portfolio performance.
Borrowing Base
For ABL facilities, the borrowing base is the total value of eligible receivables multiplied by the advance rate, representing the maximum amount the counterparty can draw at any given time. The borrowing base is recalculated periodically (typically weekly) via API integrations or portfolio reports, adjusting dynamically as receivables are collected and new receivables are originated. Not all assets qualify for financing; eligibility criteria define which receivables can be included based on obligor quality, tenor limits, geographic restrictions, and exclusion criteria (disputed receivables, related party receivables, sanctioned entities).
Concentration Limits
Enforced at both the Market and Vault level, concentration limits prevent over exposure to any single risk factor. Limits are hardcoded into facility parameters and enforced at the point of drawdown; if a drawdown request would breach a limit, it is rejected until the portfolio is rebalanced.
Typical concentration limit categories include single obligor limits (maximum percentage exposed to any individual obligor, e.g. no more than 10% to a single buyer), industry limits, geographic limits, and top-N obligor limits (maximum combined exposure to the largest N obligors).
At the Vault level, Curators layer additional concentration caps on top of Market-level limits. See Port Vaults for details.
Covenants
Ongoing conditions that serve as early warning triggers. Covenant frameworks are tailored to each Market but commonly include minimum collection ratios, maximum delinquency rates, maximum default rates, minimum tangible net worth requirements, and reporting compliance obligations.
Covenant breaches trigger defined escalation procedures. See Default & Recovery for the full escalation process.
Insurance Coverage
Where applicable, Markets incorporate insurance to offset specific risks: trade credit insurance covering obligor default risk (typically at 80–95% of the receivable face value), political risk insurance covering losses from political events such as currency inconvertibility, expropriation, and political violence in cross-border transactions, and keyman/fidelity insurance covering losses from fraud or misconduct by counterparty personnel.
Collateral & Security
Facilities may incorporate additional security beyond the underlying receivables or inventory, including personal guarantees from the counterparty's principals or directors, corporate guarantees from parent companies or affiliated entities, receivables assignment, and post-dated payment instruments that can be enforced in the event of default.
True Sale (Forward Flow)
For Forward Flow Agreements, loans are transferred to the SPV via a true sale, a legal transfer of ownership that removes the loans from the originator's balance sheet. In the event of originator insolvency, the loans remain the property of the SPV and are not available to the originator's creditors. True sale opinions are obtained from independent legal counsel to confirm the enforceability of the transfer.
Collection Account Control
Loan and receivable repayments are directed to a controlled collection account managed by the SPV or a designated trustee. This ensures collections are properly ring-fenced and distributed according to the waterfall priority, preventing commingling with the counterparty's operational funds.
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