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Trade finance platform Raistone was pitching eye-popping returns to investors in one of its receivables financing funds, before the collapse of its client First Brands pushed the lender to put itself up for sale.
The Raistone Receivables Finance Yield Fund (RRFYF) generated annualized returns of 19.8% for 3Q24 and 21% for 4Q24, according to a pitch deck shared with investors earlier this year and recently obtained by 9fin.
Those returns represent a sharp uptick from the first half of 2024: the deck lists annualized returns of 11.3% for 1Q24 and 13.8% for 2Q24. Another slide says the firm delivered a 13.3% average annual return to investors between 2021 and 2023.
The deck described the fund as giving investors access to “short duration, self liquidating, B- or better-rated assets” and touted its “commitment to conservative risk management practices”.
In a slide describing the investment opportunity, Raistone highlighted the “low credit risk” of its investments as a selling point: “Suppliers’ customers (the primary risk) rarely default without warning, resulting in extremely low loss rates,” it said.
Raistone was founded by Dave Skirzenski, who previously originated and structured deals for Greensill Capital before that trade finance platform collapsed in 2021.
How it’s going
Even by the standards of the hot private credit market, the returns being promised by Raistone for this fund were at the higher end of the spectrum — and they are especially notable in hindsight, given the predicament the lender now finds itself in.
First Brands, the auto parts supplier that crashed into bankruptcy earlier this year after lenders raised alarm about its off-balance-sheet financing arrangements, was a huge client of Raistone. Dozens of Raistone employees have been let go in recent weeks, and as it faces a liquidity crunch, the lender is now looking to sell itself, as reported by Bloomberg.
Meanwhile, First Brands is suing its reclusive founder and former CEO Patrick James — who has since been shown to have a history of troubled business dealings — over alleged fraud. Laywers representing multiple groups of its creditors have also made allegations of fraud.
But this may not be the end of Raistone’s relationship with First Brands. The lender is hoping to perpetuate its relationship with the company and generate $27m by offering it more financing as it emerges from bankruptcy, according to Bloomberg.
In a way, part of the firm’s fundraising deck addresses that kind of opportunity: “While rent/loan/bond payments can be deferred in times of stress, payments to suppliers are vital for continued operations,” says one slide.
How it started
In a slide detailing RRFYF’s portfolio breakdown, Raistone said 63% of its assets were rated B-, while 2% were B+, 17% were BB- to BB+, and 12% were BBB- or better. Only 6% were listed as unrated to CCC+.
The same slide notes that 70% of the portfolio was supply chain finance with a tenor of 142 days, and 27% was accounts receivables financing with a tenor of 91 days. It also says that 45% of its borrowers are from the manufacturing industry, and 38% from the “Professional, Scientific and Technical Services” sector.
Another slide notes that Raistone assessed credit risk by obtaining data “from B2B invoicing platforms to evidence past invoices, invoice approvals and payments for each supplier-customer relationship”.
In a slide detailing risks of the fund, the firm presents its “mitigants” against fraud: “The Servicer reviews the credit strength of the supplier, the history of the invoices and payments between the customer and supplier, and obtains (where available) independent confirmation of invoice reconciliation by the customer prior to funding the supplier for each invoice”.
These mitigants seem to have not been quite sufficient: in the wake of the First Brands bankruptcy, Raistone has claimed that as much as $2.3bn tied to third-party factoring “simply vanished” and pushed for an independent examiner.
Recently, a bankruptcy judge approved the appointment of an examiner to investigate alleged factoring fraud and issues with off-balance-sheet financing at the auto parts supplier.
Raistone declined to comment for this article.
