The objective of the Royalty Payment Assurance Corporation (RPAC) is to assist revenue royalty issuing companies in structuring and placing their royalties.
The RPAC contract, specific to each funding, will be developed in conjunction with the royalty issuer, and the RPAC fee will be paid by the royalty issuing company. The obligation of the RPAC to purchase a contract occurs only when the royalty issuing company fails to make a royalty payment to the investor as required by the Royalty Agreement.
The RPAC obligation to the investor, if the investor wishes to sell the royalty, will be to purchase the defaulted royalty for the difference between the investor’s payment for the royalty, and the cumulative amount received in royalty or other payments from the royalty issuing company. The royalty investor will thereby be able to recoup the amount paid for the royalty. This reduction of the risk of the royalty, assuming the successful functioning of the RPAC, should result in a lower Royalty Rate than would be the case absent the RPAC’s commitment. The existence of the RPAC should also make the royalty easier for the issuing company to place with investors.
Therefore, the RPAC fee will be negotiated with the royalty issuing company, keeping in mind the company’s stage of development. The fee for a revenue generating company will be far less than the fee for a startup.
The RPAC, upon purchase of the royalty, will have the benefit of being both a general creditor of the royalty issuing company and possibly having priority covering specific assets of the company as security for the amount due to the RPAC. For example, the transfer of the intellectual property of the company or any other asset can be given priority as payment for the amount owed to the RPAC.
The independently owned RPAC will both be paid fees by the royalty issuing company and may also benefit from the profits earned from actively managing the premiums collected from issuers.
Arthur Lipper, Chairman arthurlipper@gmail.com
British Far East Holdings Ltd.