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Hybrid Capital
Capital between senior debt and equity.
Hybrid capital is appropriate for owners who require quasi-equity capital that does not involve dilution or loss of control. These are situations where the senior lenders have reached their limit, while the equity story is still intact.
Typical scenarios
- A HoldCo, founder or family office which requires liquidity without the sale or loss of control
- Quasi-equity capital or pre-IPO capital when sale or dilution at the current valuation is undesirable
- HoldCo loans that are flexible with respect to coupon (PIK) because of the uncertainty around dividends from operating companies
What we look for
- Downside protection through both the equity valuation and the structure: security, preference, puts or other protections
- An exit strategy within a defined period of time
Instruments
HoldCo and PIK (payment-in-kind) loans, mezzanine loans, preferred equity, perpetual loans, convertible loans and loans with warrants.