Structuring a club deal through a securitisation compartment

A club deal brings several investors into one transaction on identical terms: a loan to a company, a participation in a pre-IPO round or a co-investment alongside a sponsor. Organised privately, it requires a separate agreement with each investor and direct payments between the parties. Issued as notes, the same transaction becomes a security.

The mechanics

1. The sponsor and the arranger agree the terms of the financing: borrower, amount, tenor, return and security.
2. A compartment of the securitisation vehicle is dedicated to the transaction.
3. The compartment issues a series of notes with its own ISIN; investors subscribe through their custodian banks.
4. The proceeds are lent to, or invested in, the target company as set out in the Final Terms.
5. Interest, principal or proceeds received by the compartment are paid to noteholders through the paying agent.

What investors receive

• A security held in their own custody account, with an ISIN and regular price information
• Segregation of the compartment’s assets from other compartments and from the issuer
• A single set of documents and identical terms for all noteholders
• Payments and corporate actions handled through standard banking channels

Typical underlyings

• Senior or subordinated loans to an identified borrower, with a defined security package
• Participation loans with a return linked to the borrower’s results
• Shares acquired in a pre-IPO or private funding round

Each series has a stated maturity and an underlying fixed in its Final Terms. The structure is suited to closed transactions with a defined object, not to open-ended pooling of capital.

This article is general information for professional investors and does not constitute investment, legal or tax advice. The documentation of each series governs.