Private placement
A practical alternative for raising capital.
A private placement is the private sale or “issue” of corporate debt or equity securities by a company or “issuer” to a select number of investors. It is another way that you can raise capital, versus selling a publicly offered security or establishing a traditional bank credit arrangement.
Three key features classify a securities issue as a private placement:
1. The securities are not publicly offered
2. The securities are not required to be registered with the Securities and Exchange Commission (SEC)
3. The investors are limited in number and are “accredited”
Traditionally, middle-market companies like yours have issued debt in the private placement market directly with a private placement investor, such as a large insurance company or other institutional investor, or through an agent (often an investment bank), who then solicits bids from several potential investors. Larger transactions (£100 million+) are typically done with an agent. It is possible for there to be as few as one investor for any issue. A private placement issuance is a way for institutional investors to lend to you in a similar fashion as banks, with a “buy-and-hold” approach, and with no required trading or public disclosures. Historically, banks refer to investments as making “loans,” whereas insurance companies purchase “notes.”
Investment focus
- Middle-market companies with attractive growth prospects and positive cashflow
- Company revenue minimum of £50 million
- Management teams and active ownership with an economic stake in the company’s success
- Ability to provide senior debt investments between £10 - £300 million in size
- Ability to provide subordinated debt investments between £10 - £100 million in size
Typical uses
- Debt refinancing
- Debt diversification
- Expansion and growth capital
- Acquisitions
- Stock buyback / recapitalisation
- Taking a public company private
- Employee Stock Ownership Plan (ESOP)
Structural characteristics
- Senior debt and/or subordinated debt
- Principal repaid after senior debt has been fully amortised
- Combination of cash coupon and deferred interest
- Ability to provide senior debt alongside junior capital for a seamless, one-stop solution with a single, relationship-oriented capital partner
- Typical maturities: three - 25+ years
- Flexible payment structures, including amortising or bullet, and fixed or floating rate
Issuer benefits
- Relationship-focused capital provider
- Holistic approach to evaluation
- Ability to fund transactions in multiple currencies
Typical Size
- £10 million - £300 million
OUR TWO CENTS
Private placement
Hear Michael Campion, Brian Thomas, and Dianna Carr provide you with an overview of private placements.
Types of Private Placements
There are many types of private placements but the most common is long-term, fixed-rate senior debt. Like bonds or bank loans, private placement debt securities can either be secured, meaning they are backed by collateral, or unsecured, where collateral is not required.
In addition to senior debt, other types of private placement debt issuances include subordinated debt, asset backed loans, leases, and shelf issues.
“Pricoa Private Capital has been a supportive partner for more than a decade. The Pricoa team’s deep knowledge of our business and creativity in customising a financing package were a critical part of completing this transaction and positioning our company for long-term growth.”
Steve Arntzen, CEO, Century Gaming, Inc.
PERSPECTIVES
Navigating the world
of private placements
The Pricoa Private Capital Guide to Private Placements.
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Pricoa Private Capital (‘PPC’) is a trading name of PGIM, Inc. (‘PGIM’), the principal asset management business of Prudential Financial, Inc. ('PFI'). Pricoa Private Capital registered in Ireland as Pricoa Capital Group (Ireland) Limited, Pramerica Drive, Letterkenny Business and Technology Park, Letterkenny, Co Donegal, F92 W8CY, Ireland. Registered in Ireland under company number: 635793. Authorised and Regulated by the Central Bank of Ireland. In the United Kingdom (UK), and various other jurisdictions in Europe, certain investment activities are undertaken by Pricoa Capital Group Limited, authorised and regulated by the Financial Conduct Authority, (registration number 172071). Pricoa Capital Group Limited is registered in England No. 1331817. The registered office is Grand Buildings, 1-3 Strand, Trafalgar Square, London WC2N 5HR. PPC, Pricoa, PGIM and the Rock symbol are service marks of PFI and its related entities, registered in many jurisdictions worldwide. PFI of the United States is not affiliated with Prudential plc, a company incorporated in the United Kingdom.
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