Debt Fund Question
If a borrower sells the asset say, and repays back debt early. Is that suppose to be a good thing that you got paid back or do you factor in the interest you are losing from when you initially did your return analysis?
It's a bad thing as you're not earning your return as you got paid early, ie the lost interest.
You can however mitigate this by having a combination of
Pre-paymemt fees
Or
A make whole to target an EM for the lender, make hole being an amount equivalent to X of interest that would generate an EM of 1.x for the lender.
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