In a market where traditional bank lending continues to become more selective and capital markets remain volatile, private placements can serve as a flexible, long-term solution for financing needs.
Here are five ways a private placement could help businesses navigate today’s capital landscape – and why it may serve as the right complement (or alternative) to bank debt:
1. Long-term, Fixed Rate Capital in A Volatile Rate Environment
As interest rate uncertainty continues, private placements offer access to long-dated, fixed rate capital – minimizing refinancing risk that comes with short-term debt maturities.
2. Diversification of Capital Structure
Private placements can help businesses expand their capital base, broadening the capital pool available to companies. The breadth and investment appetite of the private placement market can often equal or exceed that of the syndicated bank market.
3. Market Independence
The private placement market is often seen as a more stable market than the public debt markets and is “open for business” at times when the broader public debt market is “closed.” Reduced dependence on a single market for capital can be an important consideration for companies should bank regulators become more stringent, or during times of heightened public market volatility.
4. Tailored to Your Situation
Whether you are pursuing expansion, buying out a partner, or refinancing existing debt, private placement can be custom structured around your objectives, including delayed draws or multi-tranche solutions.
5. Access to Patient, Relationship Driven Capital
Private placement investors take a long-term view. They are often willing to engage early, even ahead of a formal transaction, to understand your business and help shape a capital plan.
CASE STUDY: RAC receives a Private Placement to diversify its funding sources
Historically, RAC accessed the bank and public bond markets for its debt requirements. However, RAC was interested in exploring a private placement as an alternative. Given the uncertain issuance environment and more rigid minimum benchmark sizes in the public debt markets, private placements offered more flexibility and ease of execution as compared to the sterling public bond market. Additionally, the private placement enabled the Company to access longer term financing and diversify its existing financing sources. See the full story here.
As we look ahead to the second half of the year, many businesses are reassessing their capital needs with an eye toward stability, flexibility, and patient capital. Whether its planning for growth, navigating refinancing timelines or preparing for potential M&A, a private placement can offer the long-term, relationship driven financing needed to support those priorities. As you evaluate your options, we are here to help you explore how private placements can fit into your strategy.
