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EB-5 Fund

EB-5 Fund | New Commercial Enterprise – American Industrial Brands

By November 8, 2023No Comments

American Industrial Brands Fund 1, LLC, the new commercial enterprise (the “NCE” or the “Company”), was formed on October 4, 2022, as an Indiana Limited Liability Company for the purpose of raising up to $12,800,000 from 16 EB-5 investor through a Private Placement Memorandum dated December 14, 2022. The offering price per unit is a $800,000 Capital Contribution plus an Administrative Fee of $80,000.

The NCE will make a loan (“EB-5 Loan”) to American Industrial Brands, LLC (“the JCE”) to finance the expansion of the manufacturing facility in Kokomo, Indiana.

Disbursements

As per the EB-5 Loan Agreement dated December 14, 2022, the NCE will advance the funds of the EB-5 Loan to the JCE in increments of $800,000 (referred to as a “tranche”). Each tranche represents the Capital Contribution of one EB-5 investor.

The NCE has the discretion to either provide the funds as a singular tranche of $800,000 to the JCE or let multiple tranches aggregate before disbursing the total amount.

The release of each EB-5 investor’s funds will be at the NCE’s discretion. These Disbursements will be made using checks or wire transfers with immediately available funds, after NCE has received Capital Contributions from its EB-5 investors into its general account. Each disbursement will be recorded through a promissory note or an updated promissory note reflecting the total increased amount borrowed, replacing any existing promissory note.

Although the EB-5 Loan proceeds may be provided in separate tranches, all of the payments made by the NCE to the JCE will be considered a single credit facility when viewed in aggregate.

The EB-5 Loan, as stated in the loan agreement between the JCE and the NCE (the “Loan Agreement”), has a duration of five years.

If American Industrial Brands Fund 1 Manager, LLC (the “Manager”) of the NCE consents, the JCE has the option to prepay all, or a portion of the EB-5 Loan using operational profits, provided that such prepayment adheres to USCIS policy. Prepayments are allowed when they are necessary to fulfill the “I-526E Denial Refund Guarantee.” Under this guarantee, the JCE will reimburse the EB-5 investor’s portion of the EB-5 Loan (equivalent to the Capital Contribution) to the NCE, facilitating the repayment of the EB-5 investor.

The EB-5 fund is providing a EB-5 Loan to the JCE, which bears an interest rate of 8% per annum and will accumulate interest. Interest payments will be made when the Project generates operational profits and, subsequently, will be due quarterly from operational profits.

Upon reaching the maturity date, the JCE is obligated to repay the entire outstanding principal amount along with any accrued and unpaid interest. If, at the time of maturity, the JCE is unable to repay the full EB-5 Loan amount, the unpaid portion will continue to accrue interest.

The obligations of the JCE under the EB-5 Loan will be secured by a mezzanine-level pledge of Class B membership interests in the JCE. These interests are owned by JAW2 Investments, LLC and Charles Dockery, and they represent 51% of the equity and voting power of the JCE. In the event of a default by the JCE in fulfilling its obligations to service the EB-5 Loan and repay it upon maturity, the NCE has the option to foreclose on the pledge and acquire partial ownership of the JCE.

The JCE has the ability to secure additional financing through debt or equity. However, it’s important to note that such financing may lead to the subordination of the EB-5 Loan to other EB-5 investors or lenders.

The EB-5 Loan has a duration of five years. Repayment of the EB-5 Loan will be made by the JCE using operating cash flow, retained earnings, or through another capital event.

If American Industrial Brands Fund 1 Manager, LLC (the “Manager”) of the NCE consents, the JCE has the option to prepay all or a portion of the EB-5 Loan from operational profits, ensuring compliance with USCIS policy. Prepayments are also allowed when necessary to fulfill the “I-526E Denial Refund” requirement. In such cases, the JCE will repay the investor’s portion of the EB-5 Loan (equivalent to the Capital Contribution) back to the NCE to facilitate repayment in case of denial.

If the JCE repays any portion of the EB-5 Loan principal while EB-5 investors are still within their At-Risk Period, the NCE will retain the proceeds allocated to those EB-5 investors. These funds will be placed in a reserve account and maintained in at-risk investments in accordance with EB-5 program requirements. The Operating Agreement grants the Manager the authority to reinvest capital in specified types of investments.

The NCE and JCE are required to retain the capital contributed by EB-5 investors for a minimum of two years (the “At-Risk Period”), Additionally, the EB-5 capital must remain invested in the JCE until the parties have faithfully completed the original business plan without significant changes and have generated sufficient job opportunities to fulfill the requirements of all EB-5 investors in the Project.

In cases where EB-5 investors have not reached the end of their sustainment period when the JCE repays the capital, the NCE is obligated to redeploy such capital into commercial activities, excluding the purchase of stocks, bonds, or retirement of long-term investment interests belonging to others.

According to the Operating Agreement, the Manager is authorized to reinvest the capital in specific types of investments, including further construction and development of the Project, EB-5 Loans to other projects that may or may not be affiliated with the Manager, such as the development, construction, or operation of additional plumbing manufacturing or distribution facilities.

The Administrative Fee will be utilized for covering offering expenses, which encompass fees to marketing agents in foreign countries, compensation for financial advisors, legal and accounting expenses, administrative costs, as well as reimbursements to the Manager for the advance payment of such expenses and compensation for efforts involved in conducting the offering. Furthermore, the NCE may utilize its income (interest on the EB-5 Loan) to remunerate agents and brokers’ fees.

The Manager of the NCE is American Industrial Brands Fund 1 Manager, LLC, (the “Manager”) and is owned by Robert Easter and Chuck Dockery. The Manager will keep any remaining portions of the Administrative Fee that have not been utilized as a fee to compensate for their efforts in establishing the NCE and conducting the offering. Additionally, the Manager will retain all profits of the NCE that exceed the Preferred Return of the EB-5 investors.