We work with clients to navigate and structure their financing, minimize dilution and determine if proceeding towards equity and equity like capital is a viable route to take.

Junior capital, which includes mezzanine and other forms of sub-debt (debt that is subordinated to the senior debt but takes priority over the common shares) can be required to fund growth, capital projects, acquisitions, and to recapitalize a business for a variety of reasons, including restructuring, succession, or to provide the funding for transactions between shareholders and shareholder distributions.

Junior Capital Financing – Common challenges:

• Feasibility of financing
• Handling gaps in financing strategy
• Establishing mix of equity, debt, and junior capital
• Financial forecasting and modeling capital structure
• Calculating equity/lender return and credit ratios
• Gaining alignment with sources of junior capital

Solution

Subordinated financing requires the business strategy to connect to the financing strategy. This requires in-depth analysis and packaging of detailed financial forecasts that articulate business goals, plans and tactics, the application of funds, the return on investment in conjunction with cash flow ability to service debt and repay loans. Sensitivity analysis is applied to measure risk and define stress tests. There are specialized lenders that focus on subordinated/mezz financing and they place greater reliance on future business plans and financial forecasts over historical performance.

We connect the business strategy to the financing requirements and identify the options to best-case financing structure, the cost of financing, most suitable provider(s). To build a lending case, we draw on our previous experience within this financing class and drill down into the details to ensure alignment with each prospective lender and solution.

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