Credit Risk Analysis Criteria

This framework outlines GAIB’s methodology for evaluating companies seeking loans to purchase GPUs for AI compute operations. By combining robust credit analysis with industry-specific considerations, GAIB identifies, assesses, and mitigates risks to ensure sound investments while aligning with market opportunities in the rapidly growing AI sector.

Portfolio Credit Quality

Assessing the borrower’s credit profile is the foundation of any risk analysis. GAIB will evaluate borrower’s credit history, repayment capacity, and financial structure to determine their ability to meet obligations. The broader macroeconomic landscape, including regulatory changes and market conditions, is factored into this assessment to account for external risks. Borrowers are expected to maintain a solid balance sheet with a Debt-to-Equity Ratio <0.65 and Current Ratio >1.2, along with a Debt Service Coverage Ratio >1.35x to demonstrate repayment capability.

• Borrower creditworthiness is determined through:

  • Character: Historical performance on past loans, including timeliness of repayments.

  • Capacity: Free cash flow and projected ability to service debt obligations.

  • Capital: Analysis of leverage and liquidity metrics to ensure stability.

• Macroeconomic considerations include:

  • Sovereign & Country Risk: Political stability, economic growth, and regulatory conditions impacting business operations.

  • Market Conditions: Trends in AI compute demand, pricing fluctuations, and GPU supply chain dynamics.

Transaction Structure

The structure of the transaction is critical to mitigating overall downside risk. GAIB will evaluate the robustness of credit enhancements, such as collateral quality and reserve mechanisms, to protect against defaults. The cash flow allocation must prioritize repayment certainty, and all structural features are designed to manage potential risks arising from market or operational disruptions.

• Key transaction elements include:

  • Credit Enhancements: Loans are backed by high-quality GPUs with proven residual value, supported by reserves, overcollateralization, and insurance where needed.

  • Cash Flow Design: Predictable allocation structures, with triggers in place to adjust for performance variances or portfolio changes.

  • Market and Regulatory Conditions: Consideration of evolving policies or market factors that could impact the borrower’s business.

Counterparty & Operational Risk

A borrower’s operational resilience and the strength of its leadership team are integral to GAIB’s evaluation. Management teams with deep expertise and a track record of successfully navigating complex projects are viewed favorably. Operational efficiency metrics, including Power Usage Effectiveness (PUE <1.5) and COGs-to-Revenue ratios (<25%), will highlight the borrower’s ability to deliver consistent performance in high-demand environments.

Risk Resilience: Analyzing exposure to regulatory, technological, and operational disruptions.

• Core areas of assessment:

  • Management Experience: Preference for teams with 10+ years in relevant sectors and a history of meeting financial obligations.

  • Operational Metrics: Evaluation of GPU utilization within efficient data center operations to ensure project viability.

Recovery Rate Analysis

Collateral quality plays a significant role in mitigating loss exposure. GPUs must maintain residual value, with strong liquidity in the secondary market. Recovery rate assumptions will be stress-tested under multiple scenarios, considering both market volatility and potential delays in asset liquidation.

• Recovery analysis focuses on:

  • Collateral Quality: Book value, depreciation schedules, and lifespan of GPUs.

  • Market Liquidity: Current and anticipated demand for used GPUs in secondary markets.

  • Historical Trends: Price trajectories of similar assets to inform expected recovery values.

Stress Testing and Cash Flow Modeling

GAIB will conduct stress testing and cash flow modeling to simulate performance under adverse conditions. This ensures GAIB captures potential risks associated with borrower defaults, delayed repayments, or fluctuations in GPU values. These tests will account for external variables such as market dynamics and economic shocks.

• Stress scenarios include:

  • Default Risk: Derived from borrower-specific data, industry benchmarks, and economic forecasts.

  • Cash Flow Timing: Assessment of the impact of repayment delays and liquidation lags on expected recovery.

Monitoring and Updates

Continuous monitoring will be essential to identify and respond to emerging risks throughout the loan term. GAIB will track key financial metrics and collateral values to ensure alignment with risk expectations. Additionally, GAIB remains vigilant to external factors such as new GPU technologies or market disruptions that could impact the borrower’s operations or the value of pledged assets.

• Monitoring Includes:

  • Market Developments: Tracking AI compute growth and supply chain stability to adjust risk assessments.

  • Financial Health: Regular updates on free cash flow conversion (>1.0) and gross margins (>80%).

  • Collateral Valuation: Periodic re-evaluation of GPUs to capture shifts in market sentiment or technological relevance.

Internal Rating Criteria

Loan approvals are based on a comprehensive weighted scoring system: Sovereign & Country Risk, Industry Risk, Company-Specific Risk, Management Risk, Financial Risk, and Securitization Risk. Minimum internal credit scores are set by Credit Committee, along with meeting Multiple on Invested Capital (MOIC) benchmarks. Loans falling below these thresholds are escalated for senior-level review.