Capital Raising

I have had significant global involvement in many different methods of capital raising over the years in diverse sectors. I can assist entities in selecting the appropriate funding route for their current financial requirements, taking account of how their business is performing and their current strategy.

I have experience in all of the types of capital raising (as detailed below) – either as a provider, arranger or rater. I can help entities to understand the pros and cons of each funding route and ensure they select the one which matches their business needs at that time.

Private Equity

– There are a number of private equity houses who focus on different sectors. They have very specific requirements as to the type of risk they are able to manage and the associated returns they are looking for. Some houses seek to flip their equity investment in the short term whereas others are looking for the long term stable returns. Private equity houses have inhouse experts who can understand the operational needs of an underlying investment and this can be of significant benefit to the entity.

Structured Equity

– This can include structures such as Convertible Bonds or Debentures. They have their place for certain entities or when looking at restructuring a company at a time of distress. The entity needs to understand the benefits of such a structure but also the potential downsides in due course.

Public Equity

– Undertaking an Initial Public Offering (“IPO”) as way of attracting equity into an entity can be very attractive. It is a heavily regulated funding route and requires strict, regular reporting. It can also offer an attractive option for the current owner(s). In Infrastructure, single assets such IPO’s are unusual – for multiple-asset-owning entities they are more common and are an asset class of their own.

Unlevered Capital

– These are combined debt and equity investments which some institutional funders will undertake. They tend to be limited to the renewables market and are particularly effective for merchant power transactions. This is because the volatile nature of such revenues may lead to covenant breaches on typical project finance debt/equity funded transactions.

Bank Funding

– There are many different forms of bank lending but generally such funding will be short term and will need to be refinanced. Banks will change their appetite for different types of deal as time progresses – so when trawling the market with a new transaction it will take time to find the most suitable lender. Some banks will only act as arrangers and seek to syndicate, whereas others will be participants in larger deals or sole lender in smaller deals. They will seek to protect themselves and negotiate tight covenants, which may reduce the entity’s flexibility. Additionally, banks will seek to tie in other products, which may include hedging instruments, refinancing mandates etc.

Private Placement Funds

– Private Placement players can also invest in both investment grade and non investment grade bonds into different funds they manage. These investors can be the big “Institutional Investors” or the specialised “Infrastructure Debt Funds”. Some may not need a formal credit rating at all whilst others may be content with a single private rating. Investment grade bonds tend to be longer tenors with a tight covenant package and security whereas non investment grade high yield bonds will have a looser covenant package. Whilst these bonds are not considered tradable – they are bought on “buy and hold” basis but can be traded privately.

Public Bonds

– These can also be investment grade or non investment grade bonds but they will all be formally rated. Once an entity has issued in the public bond market it can expand it’s investor base and continue to access this market as it’s funding needs change over time. Issuing such bonds will bring obligations on the entity such as regular reporting and adherence to covenants. These bonds are tradable, so the entity may see changes in the investor pool as time progresses because institutional investors’ appetites will change over time. In certain circumstances these bonds can be acquired by hedge funds. Some entities are able to choose their rating category – i.e. which covenant package they wish to adhere to.

Wrapped Bonds

– Assured Guarantee are now the only financial guarantor in the market. They look to provide unconditional interest and principle guarantees for public sector and infrastructure entities. The underlying asset needs to be rated to at least “Investment Grade”. An entity will benefit from a wrapped bond where it is seeking to widen its investor base (to those who do not invest in private placements directly) or where the risk is unusual for the investor base.

Retail Bonds or Minibonds

– These bonds tend to be for smaller amounts and are designed to seek investors from the retail market. Retail bonds tend not to be rated, but they are a regulated and tradable instrument. Minibonds are not as well regulated. They tend to be less well structured and are not a tradable instrument.