Football season is back, reminding us that teamwork makes the dream work! Utilization of equity kickers is an increasingly popular play for middle-market lenders to bridge the gap between the current yield that borrowers can pay and their own absolute risk-adjusted return thresholds. Properly designing the playbook is critical to a victorious outcome, particularly around two key goals:
- Lowering a borrower’s cash obligations. Lenders who receive a portion of their returns via warrants or an equity co-investment are more incentivized to accept lower interest payments, allowing borrowers to reallocate cash toward growth initiatives (offense) or keep it on the balance sheet (defense).
- Aligning the interests of borrowers and lenders. Credit funds who have the potential for equity upside are encouraged to be more supportive of a company’s long-term success. Uniting all players on a team towards a common goal is always a recipe for success – and capital partnerships are no exception.
Connect with Our Team
- Jonathan Zucker, Managing Director, Head of Capital Advisory, jzucker@IntrepidIB.com
- Boris Zikratov, Director, Capital Advisory, bzikratov@IntrepidIB.com
- Stephen Senior, Associate, Capital Advisory, ssenior@IntrepidIB.com