During the COVID-19 pandemic, a number of borrowers faced a liquidity crunch and turned to asset-backed financings as a way of raising emergency capital as cash flow lending became impossible. In lieu of cash flow projections, borrowers buttressed lender confidence by collateralising an increasingly broad array of saleable assets – such as landing slots (Delta Airlines) and cinemas (AMC Entertainment).
These financings enabled borrowers to raise liquidity whilst, unlike the J Crew technique, staying within the agreed parameters of their existing financings – both in letter and spirit.
Data asset financing is the logical extension of this trend. Importantly, however, data is ubiquitous. Whereas only certain borrowers were able to collateralise unencumbered assets in 2020, data is an asset type that almost all borrowers accrue as part of the ordinary course of business.
In an increasingly digitised world where businesses often have a larger online footprint than a real one, the rate at which this valuable data is both produced and accrued will only accelerate. Realising the inherent value of this data and utilising it to raise financing could open up an entirely new avenue of financing for a broad spectrum of companies. This primer explains:
- What data assets are
- How data assets can be financed
- How data assets can be valued
- What data regulations need to be considered
- How data asset financings can be structured
If you would like further information please contact Samuel Norris or another member of the Ropes & Gray team.
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