Potential liquidity concerns are dominating private equity managers’ contingency planning for their portfolio investments. Flexible funding solutions provided on a fund-wide basis have emerged as a means for managers to tap additional capital as needed in order to finance working capital or additional equity for their investee companies.
A range of preferred equity providers, including funds dedicated to the strategy, traditional secondary players and investment banks, have identified the current COVID-19 hit market-place as a window of opportunity to design bespoke funding solutions for managers seeking to rapidly plug liquidity gaps and add extra ballast to their portfolio company balance sheets.
Here we provide a snapshot of the key legal and commercial points to be considered when putting in place preferred equity instruments. Our market-leading private equity team, encompassing funds, M&A, finance, tax and regulatory expertise, is uniquely placed to assist with the structuring and execution of the whole range of liquidity and financing structures increasingly being employed at fund level.