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Introduction

A convertible debenture is a hybrid security that combines the features of both debt and equity into a single investment instrument. The debenture is a loan that the investor will make to Sun Valley Club, LLC for a term of five years, with interest at the five-year treasury note rate, plus a coupon rate of 6% (10.12%), and a warrant to convert the principal value of the note amount into a subscription of equity in the LLC. The warrant is a method to convert the principal amount of the debenture into equity; however, the Investor may elect to receive a return of the debenture note principal in the same cash amount as the original investment. In other words, “cash out at the end of five years is an investor exit strategy.” The accrued interest will be paid in full in one lump sum at maturity of the note and the note holder may elect to convert the note into an equity in the LLC by exercising the warrant option. The warrant option will entitle the holder to convert the note into LLC Class C interest at $1.00 per interest (1:1 ratio).

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Investment Introduction

Sun Valley Club has established certain guidelines to qualify "Accredited Investors" who wish to consider the Convertible Debenture as a potential investment to achieve their financial goals. An investment in the Convertible Debenture is suitable for self-directed plans such as Roth, 401(k), IRA and SEP.  This investment is suitable also for other qualified accredited investors who do not require annual distributions of cash during the debenture note holding period.

An investment in the Sun Valley securities requires the managing members to verify the accredited investor status under Regulation D, Rule 506(c) provided under Rule 501(a) by a third party, or if the accredited investor holds certain degrees from an accredited Major university, a copy of the investor diploma will meet the requirement. (See, SEC Regulation D)

Please review each topic of the investment section and feel free to correspond with the Managing Members to answer all of your questions. See, About Us/Managing Members.

Convertible Debenture Notes

The Convertible Debenture notes are available for purchase in increments of $20,000 with a minimum investment of four increments for a total of $80,000.00, (the “Minimum Investment Amount”). After the minimum number of increments has been purchased, then the investor may purchase additional increments of $20,000.00 each. The minimum aggregate number of purchased convertible debentures will be no less than $1,200,000 or the aggregate of 15 minimum investment increments or 60 increments of $20,000.00, (the, “Minimum Offering Amount”). The maximum offering amount shall be in the total amount of $6,400,000.00 or 80 minimum investment increments of $80,000.00 or the aggregate of 320 increments of $20,000.00, (the “Maximum Offering Amount”).

Class C Interest on Conversion

The convertible note holder may exercise the warrant option to convert the principal amount of the convertible debenture note into LLC interest in ownership equity on notice at the marturity of the note. The noteholder will be required to give the LLC notice with 15 days after maturity of their note to convert their interest into equity. The conversion rate is 1:1 ratio, each dollar of principal amount of the debenture note will be exchanged for 1 interest in the LLC.

The Sun Valley Club, LLC, Class C interest will be subscribed upon maturity of the Convertible Debenture Notes on notice from the holder to convert their increments into 20,000 interest per unit of investment in exchange for $20,000. increments of convertible debenture notes that have matured. The units of interest in the LLC will be issued upon notice from the debenture holder, after the Warrant option is exercised, to convert the debenture into Class C units of interest.

The benefits of converting the note to equity provides for a preferential return on the the investment amount at a rate of 8% preferential interst (simple interest) paid monthly, quarterly or at the discretion of the Managing Members and a proportionate share of profits, losses, gains and deductions. Tax Reporting 1065/K1.

 

How It Works (see chart)
1. Submit investor questionnaire, receive a complete set of investment documents & ask questions about investment.
2. Accredited investor verification, provide third party verification as to accredited investor status. 
3. Purchase convertible debenture notes (10.12% annual interest, 60 month maturity, plus 2.7% principal inflation)4. Debenture notes bear annual interest of 10.12% plus an inflation factor of 2.7% that will be paid only if investor converts principal amount of note into Class C equity interest.
5. At maturity of the debenture note, the investor can exit the investment or exercise the warrant option to convert the principal amount into Class C equity interest at a 1:1 ratio.
6. If investor exits, the principal amount is returned along with accrued interest of 10.12% x 5 years = 50.60% = $40,800 + 80,000 = $120,480.
7. If warrant option is exercised, the LLC issues Class C equity interest at $1.00 per Interest and pays the accrued interest at 10.12% x 5 years. The principal amount of note will be converted into LLC equity at a 1:1 ratio.
8. Class C interest earns 8% (simple interest) preferential return on the principal amount of the investment, which will be paid from cash flow monthly, quarterly or semi-annually, from the net income of the LLC until the Class C interest are redeemed.
9. If Class C investor wants to leave LLC in less than 2 years, Class C interest will be redeemed and investor will receive all unpaid interest.
10. If Class C interest holder remains in the LLC for more than 2 years, the investor will receive principal, any unpaid interest, and an inflation factor of 2.7% that accrued for the 5-year term of the convertible debenture note.
11. Capital appreciation example: 2.7% annual inflation factor x 5 years = 13.5% x $80,000 principal amount = $10,800 capital appreciation.
12. If the LLC calls for redemption at anytime, the Class C investor will get back the investment principal plus the 2.7% accrued inflation factor plus all unpaid interest.