Evergreen Equity Payback
We use the phrase “Evergreen Equity Payback” as our primary model to engage large institutional funds like pensions to participate in Bank of Nature. It refers to a form of financial agreement that pre-funds an enterprise in a deal that features a formula-based sharing in future enterprise cash flows.
A typical evergreen formula will feature a very high allocation of cash flows to the financier (such as Bank of Nature) in the early years until an initial breakpoint is reached.
That breakpoint is equal to 100% of the financing provided, after which the allocations to the financier will drop at additional agreed break points, until a final ratable sharing is reached, which continues on an evergreen basis.
An Equity Payback to a financier is also an Equity Earnback by the enterprise and its enterprising visionaries, whose share in cash flows increase as agreed return thresholds for the financier are passed.
An Evergreen Equity Payback financing is usually designed to an Assumed Base Case of time required to provide the expected returns to the financier, at which point the sharing becomes ratable and evergreen.