RAISING PRIVATE DEBT

Raising debt and charging the company with a fixed financing burden and liens involves addressing a variety of questions, one of the most important being stress-testing the financial forecasts of the business in order to test the sustainability of its proposed capital structure.

THE BUSINESS

  • What is the current and future nature of the company’s business? At the strategic, operational, legal and financial level?
  • How much capital is needed? Why? How will it be used?
  • What are the uses of funds and over what time period will the funds be spent?
  • Is the company’s project fixed and stable? Are there elements of it which may change in the future?
  • What are the key risks that could have a significant impact on the company and its project? Do these impact the company’s financial forecasts? Do they impact the cash flow forecasts?

INVESTORS / LENDERS

  • For this kind of debt structure, what investors are most likely to be interested by the proposed transaction? Our book runnings typically generate over 20 investors per project.
  • Within this group of potential investors, which lenders are most aligned with the objectives of the company? Of its shareholders?

WHAT IS THE SELLER ASKING? WHAT IS THE SELLER OFFERING?

  • What is the proposed debt structure in terms of amortization and interest rate?
  • Can the future cash flows of the business withstand the monthly, quarterly or annual financial charge of the proposed debt instrument?
  • If the business were to fail to comply with the debt payments, what guarantees can be proposed to the investor / lender in order to protect him? E.g. company shares, real estate assets, financial assets, intangible assets, etc.?
  • If the debt is convertible, what percentage of the capital will be converted? And what justifies this valuation?

THE PROCESS

  • What is the best way of structuring a process to identify the best investor both for the company and for its shareholders?
  • What is the dynamic of the agreement that the company and its shareholders must reach in order to protect its interests / optimize the returns of the capital to be raised?
  • What documentation needs to be provided when, in which part of the process and how can confidential information best be protected?
  • At what point in the process should an investor be given exclusivity and how?