Understanding the Structure of Private Placement Debt

Private placement debt is a fixed-income note that pays a fixed coupon, according to a negotiated schedule. It is priced similarly to public securities, with the addition of a credit risk premium. Companies can customize the terms of their private placement offers to meet their specific needs and investor demand. Hybrid private placement involves the sale of securities that combine characteristics of both equity and debt securities.

It can also provide companies with greater flexibility and control over their funding options. When bank debt is combined with a private placement, transactions are usually carried out pari passu. Experienced managers who understand the advantages and disadvantages of the banking market and the private placement market can use both sources of funding from a tactical point of view to optimize their capital structure and improve their liquidity risk management. The introduction of private placement financing into existing bank debt expands the capital reserve available to companies, which would have several types of capital to draw on depending on the needs of the moment. Companies can access the private placement market through an intermediary or agent (most often an investment bank) to the extent that the issuer wishes to deposit its debt in several different institutions. Private placement also allows companies to maintain greater control over their funding options and their ownership structure. However, it is subject to securities laws and regulations, which can impose significant compliance costs on issuers. Companies can work with placement agents or other financial advisors to help identify and attract potential investors.

With more than 75 years of history in structuring and investing in the private market, Pricoa Private Capital can implement the personalized private placement that best suits your liquidity objectives and provides you with financial support that is coordinated with your bank, instead of competing with it.