6th May 2020
For private equity managers seeking to optimize their balance sheet preferred equity can be a flexible option in the current pandemic enabling them to invest in the firm’s growth without selling a minority stake.
Prior to the pandemic 17Capital enabled a leading US GP to strengthen its balance sheet with non-dilutive preferred equity financing. 17Capital provided $80m to a top-tier US buyout manager, enabling it to invest in the firm’s growth without selling a minority stake. The manager wanted to maintain its flexibility, 17Capital was able to structure its investment to meet this objective with no cash interest and the ability to repay from multiple cash flow streams. The manager can also draw capital over time, with a portion available at its discretion.
Importantly for the manager, 17Capital’s investment does not impact the firm’s equity ownership or its governance, allowing the team to freely pursue its vision for growth. The investment was structured to accommodate a complex corporate structure, avoid impacting existing senior debt facilities in place, and, most importantly, prioritize alignment.