Pricing Loan Guarantees For Small Partnerships

[Bryan Hancock]

I'm interested in hearing how you've negotiated and priced loan guarantees for your small (less than $5M total project capitalization) projects.  Many of my new projects will be set up as GP/LP arrangements and some may carry a co-GP for credit support depending on the project size.  I've worked out in my head what I think this is worth, but the market will ultimately tell me what it wants.  I have several options of investors I have invested with for many years who have big balance sheets who are also capable of co-investing as LPs for some portion of the equity required.  

Did you work out some split of the GP in your deal?  Do a flat fee?  Price the equity dollars relative to the debt dollars and do some ratio?  Did setting partial recourse in the loans matter for how the guarantee was priced? 

To me this is a contingent liability the co-sponsor would need to carry around on their PFS, but they're not being asked to pledge the collateral from any assets directly.  Thus aside from it being negotiable I am struggling a bit with what makes sense and is a fair arrangement.  I'll probably couple the request with a line of credit request from them for pursuit costs and possibly some other things, but for the purposes of this thread let's assume that the principal value center they'll be providing is being a guarantor for debt that may be hard to obtain for larger projects absent their participation.  The project's main sponsoring entity will have a long track record and the ability to execute once the project is capitalized properly, which the guarantee is a key value center in providing.