“If you don’t invest in risk management, it doesn’t matter what business you’re in, it is a risky business.”- Gary Cohn

For businesses to thrive, they must commit to minimizing financial risk. There are many ways to go about this, but financial services specialist TENET Financial epitomizes financial risk management with its boutique approach to project finance. Through its unprecedented due diligence and underwriting process, TENET delivers a funding platform that serves the dual purpose of raising project capital through the bond markets, thus preserving sponsor equity and delivering a low-beta risk-mitigated investment vehicle for its investors.

How does TENET perform these functions?

“How do you eat an elephant? You eat it one piece at a time,” says Jilbert Hovagimyan, Group Chairman/CEO of TENET Financial.

Mitigating financial risk is no small task. Each asset class, industry, project, and/or business is unique, with its own unique risks. For this reason, TENET approaches each funding opportunity with a customized approach, drawing upon both the knowledge and experience of its highly skilled team of finance professionals as well as partners, advisors, and subject matter experts through relationships with world-class firms like KPMG, E&Y, Marcum Associates, CBRE, AON, Marsh McLennan, and Alliant Insurance Services, just to name a few. TENET dissects each opportunity, using its 130+ point due diligence checklist, identifying elements of financial and/ or economic risk while working with its insurance partners to systematically mitigate them using a complex structure of non-property and casualty insurances, contract derivatives and other solutions, each taking a small piece of the overall risk pie. The end product is a thoroughly risk-mitigated project that can be taken to the bond markets for funding.

“Our goal is to protect the investors and bring that risk mitigation down as close to zero as possible,” says Hovagimyan.

The Burden and Value of Being Thorough

TENET’s due diligence and underwriting process are truly unprecedented and unmatched in the world of financial services. Through their efforts and financial engineering expertise, TENET’s team is capable of packaging projects to achieve investment-grade rated bonds and the lower borrowing costs associated with those ratings. This level of scrutiny, however, is not without its costs. TENET’s process can take months to complete, and not every project will make it through its stringent requirements.
The underwriting process is also quite expensive, often totaling over $500k per project, as TENET enlists gold-plate firms to provide expert opinions, feasibility analyses, and in-depth perspectives on risk and the viability of the project’s success. For those projects that make it through TENET’s process, however, accelerated access to capital, lower borrowing costs, and reduced sponsor equity dilution can be achieved when compared to traditional venture capital or private equity financing.

Our goal is to protect the investors and bring that risk mitigation down as close to zero as possible

TENET’s expertise and guidance also extend well beyond the point of funding. Due to the financial risk mitigation techniques they deploy, TENET continues to provide guidance, support, and oversight up to and through the maturity of the shorter-term bonds issued through its platform. By ensuring successful repayment of the bonds and/or transition to permanent financing, TENET proactively maintains its preferred relationships with its insurance partners. Project sponsors also have the added benefit of successfully servicing investment-grade rated debt, allowing for long-term credit rating benefits.

Deploying Due Diligence for More Reliable Outcomes

From the investor perspective, TENET’s extensive due diligence, underwriting, and project selection process offers an unmatched risk/reward investment profile. As a fund manager, TENET deploys capital under management into the final stages of underwriting, allowing its investment targets to issue bonds as the core means of funding. Returns are realized through fees from completed bond issuances and from project equity awarded through TENET’s structuring. TENET’s focus on protecting investor assets is rooted in the due diligence process itself, as capital is only deployed once TENET has scrutinized every aspect of the proposed project, has identified and mitigated the risk factors they have uncovered, and has a clear path to fund the project through the bond markets. Further, once the bonds are issued, the deployed investor capital is returned out of the proceeds of the bonds, removing investor capital that would normally be at risk from the project. This gives investors the benefits of a short-term cash return typically seen from hedge funds models in addition to the medium-term upside potential of traditional private equity, all without long lockup periods or the liquidity limitations of timing exits.

Putting in the Hours to Expedite Good Outcomes

TENET consistently receives the same glowing feedback from its partners at major investment banks, insurance companies, and its Big 4 partners that all state, “You guys are really next level in what you do.” Needless to say, these Class A firms continue to do business with TENET, solidifying the fact that TENET has always maintained itself as a reliable partner, both from a risk standpoint and a profitability standpoint, for the shareholders of an investment fund. The company is an expert at being selective. When TENET selects a project, they do so after sifting through nearly a hundred deals a month to pick the choicest nuggets. Most of their deals come through referral sources like bank officers, law firms, and accounting firms that know what TENET does and help screen the projects and potential investment target enterprises presented toTENET.

The smallest deal that TENET has worked on was estimated at $65 million. The largest was around $4 billion. The company is currently reviewing a project that just came to them from a mid-sized investment banking company that TENET has a good relationship with. It is a natural gas deal worth nearly $12 billion, making it their single largest deal, which is helping the firm scale up in their field. Hovagimyan attributes all of this to TENET’s heart and soul; its team. Every single member of the company has at least 15 to 20 years of experience and with law degrees, MBAs or master’s degrees in finance.
  • How do you eat an elephant? you eat it one piece at a time

TENET hires best-in-class specialist firms who know how to do the studies and surveys and collect the data. Then, once they prove that data, certify it, and hand it over to TENET, so that TENET is well-positioned to analyze that information to yield the greatest value for their clients.

For Hovagimyan, the benefits that TENET provides result from his nearly 38 years of experience in finance. He has led TENET with a unified goal—to continue balancing building its staff while maintaining the industry-leading investment risk/reward objectives. In that pursuit, the company strives to cherry-pick its members from a high talent pool of people with wide-ranging experience to accommodate their clients’ needs for today and for the foreseeable future. And by bringing that power to bear in every portfolio target they underwrite, TENET is able to apply an incredible amount of work to process investments, dive deeper than everybody else and ensure that no material data that can lead to investment risk falls through the cracks.