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Material items extracted from the risk-factor, conflicts, and prior-performance sections of ILS Capital Management's PPMs. Each is quoted verbatim with its source page — surfaced, not editorialized.
ILS Fixed Horizon LLC was formed in April 2022 and has no operational history or investments. Its only asset as of December 31, 2023 was $5,024 in cash. The Company is a blind pool with no identified investments.
“The Company has yet to identify any specific Notes to purchase with the Net Proceeds of this Offering and has no prior track record.”
The Company is entirely dependent on the continued service of its two co-founders, Donald Sutton and Tom Berry. The departure of either would have a material adverse effect on the Company's performance and ability to make Debt Payments.
“The Company will depend upon the efforts, experience, diligence, skill and network of business contacts of the Management team; therefore, the Company's success will depend on their continued service. The departure of any of the Company's key Management personnel would have a material adverse effect on Company performance.”
The Company purchases all notes from ILS Lending LLC and Pearl Funding LLC, which are affiliated entities managed by the same principals (Donald Sutton and Tom Berry). The loan origination, underwriting, processing, and transfer to the Company are all conducted by affiliates under common control, creating a significant related-party conflict.
“The Company will purchase Notes from its affiliates, ILS Lending LLC and Pearl Funding LLC which are subject to the following restrictions: (1) LTV for borrowers will be limited to seventy-five (75%) percent; (2) the Notes will be secured by the physical collateral underlying the Notes, which the Company may repossess upon non-payment; (3) the ability of Borrower to pass the due diligence background check initiated by Company Affiliate Loan Source LLC, which is the entity issuing the loans and transferring the loans from Loan Source LLC to the Company”
All excess profits after Debt Payments are collected by ILS Legacy Holdings LLC (the Common Member, controlled by the same managers). There is no written documentation outlining the exact amounts to be distributed since both entities are controlled by the same members.
“ILS Legacy Holdings LLC shall be collecting all excess profits earned by the Company every month, after all Debt Payments are made to Debt Unit Holders on behalf of the Manager. Since ILS Legacy Holdings LLC is the Common Member and controlled by the Managing Team (made up of Tom Berry and Donald Sutton), this is in effect compensation that will be received by the Managing Team. There is no written documentation outlining the exact amounts to be distributed since both entities are controlled by the same members.”
The Company officers (Donald Sutton and Tom Berry) simultaneously manage Loan Source LLC, ILS Lending LLC, Pearl Funding LLC, ILS Legacy Holdings LLC, ILS RE Capital I LLC, ILS RE Capital II LLC, ILS Growth Fund I LP, and ILS Income Fund I LP — entities that compete with or provide services to the Company — and will not devote all of their attention to the Company.
“The officers of the Manager will experience conflicts of interest in managing the Company, because they also have management responsibilities for other companies, including companies that invest in the same types of assets as the Company. For these reasons, all of these individuals share their management time and services among those companies, and the Company, and will not devote all of their attention to the Company.”
All agreements between the Company and its affiliates (ILS Lending LLC, Pearl Funding LLC, Loan Source LLC, ILS Legacy Holdings LLC) are not the result of arm's-length negotiations. The Company has not adopted and does not intend to adopt a conflicts of interest policy or conflicts resolution policy.
“There are conflicts of interest between and among the Company, Manager, and other Company Affiliates. All of the agreements and arrangements between and among Company Affiliates and the Company, including those related to compensation, are not the result of arm's-length negotiations. The Company has not adopted, and does not intend to adopt in the future, either a conflicts of interest policy or a conflicts resolution policy.”
Debt Unit Holders have no voting rights and cannot vote to remove or change the Manager. The Manager may not be removed under the Operating Agreement. Investors are entirely reliant on Manager decisions.
“The Debt Units are non-voting. As such, Debt Investors do not have a right to participate in the management of the Company's affairs. Debt Investors cannot propose changes to the Manager or to the Operating Agreement. The Manager will make all decisions with respect to the management of the Company. Debt Investors will have no right or power to take part in the management of the Company. Therefore, they will be relying entirely on the Manager for management of the Company and the operation of its business. The Manager may not be removed under the Operating Agreement.”
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