What is preferred capital?
Preferred capital is a term than encompass a broad range of investment instruments including mezzanine debt and preferred equity. From a risk perspective, our capital sits behind senior debt but ahead of equity in a company's capital structure. As such, preferred capital typically features a combination of debt and equity characteristics.
Typically we partner with shareholders who own the majority of the company's equity. These parties are often private equity investors, management shareholders, founding entrepreneurs, family shareholders and other types of corporate shareholder.
How does it work?
As our capital combines elements of both debt and equity, we have a great deal of flexibility in how we structure our investments. This allows us to create bespoke instruments to precisely match the needs of our partners. Unlike a bank or a leveraged lender, our capital does not require a current yield, freeing up cashflow for investment in the business. Our investments usually carry an equity participation, firmly aligning us alongside our partners, at a cost of capital that is much less dilutive than raising conventional equity finance but without the limitations of using traditional forms of debt. Our capital is often used as an alternative to raising conventional minority equity.