Private Debt

Private Debt offers flexible, bank-independent debt financing, particularly for lower-rated companies, which can be interesting for a wide range of industries, company sizes and financing reasons. Capital providers are usually institutional investors such as specialized private debt funds, family offices or insurance companies.

Advantages

Tailor-made, extremely flexible financing solutions

Fast implementation; short distances

Neither banks nor capital markets required and suitable for medium-sized, lower-rated companies

Whether tenor, rolled-up interest or security structure: Private Debt comes in many different forms. We support you not only in finding the right private debt provider, but also in tailoring the financing to your company’s needs. Please do not hesitate to contact us.

Few financing instruments as flexible as Private Debt

Flexibility is standard for Private Debt. The range of products and services extends from senior or subordinated loans to mezzanine or equity-like capital (more on this here: Mezzanine). For example, flexible interest payment structures or covenants can be agreed with the lenders – just as it makes sense for the company. Tenors of five to eight years are typically possible. Frequently, bullet loan structures mean full repayment is not made until the end of the tenor.

Loans generally start at 5 million euros, however volumes exceeding several hundred million euros are not unusual. Often times, there is one lender on the other side. This is in contrast to bank financings, where often a group of banks jointly provides the financing in a „club deal“. However, a bank can be involved alongside a Private Debt fund, providing working capital financing.

Private Debt as an alternative to the bank

Investors are usually specialised Private Debt funds, insurance companies and other institutional investors such as family offices or pension funds. Among the Private Debt funds there are also specialist funds who focus on companies in turnaround or special situations such as fast refinancings outside the capital markets. Many Private Debt funds see themselves as long-term financing partners, who also contribute their experience and industry network at the operational level, if desired by the company.

Mezzanine

As a hybrid form of equity and debt capital, mezzanine (also called hybrid financing or hybrid capital) allows capital to be injected even when traditional borrowing capacity is already exhausted. Mezzanine allows you to take advantage of the benefits of equity without having to share voting rights – provided that this flexible financing option has been structured accordingly. Mezzanine is particularly attractive for growth financing of medium-sized companies.

Advantages

Fresh liquidity without collateral

High flexibility in repayment, interest rates, etc.

Balance sheet advantages of equity capital without having to share voting rights

Mezzanine can be structured in many different ways – ranging from the silent partnership to convertible bonds. Sometimes the devil is in the detail when determining whether mezzanine is treated as debt or equity capital for accounting and tax purposes. Let us advise you on what suits you best and which mezzanine financier offers the best conditions.

Mezzanine: The best of both worlds

Profit participation certificates, hybrid and option loans, silent equity capital, subordinated loans, shareholder loans – mezzanine capital comes in many forms. The most important characteristic of mezzanine capital is its ranking position in between voting equity and senior debt. Mezzanine has copied the subordination feature from equity: In an insolvency, secured creditors are satisfied first, who also usually have access to hard collateral. A debt feature in turn are the restrictions of no or only very limited rights of say – and that the mezzanine capital must be repaid at the end of an agreed term.

Mezzanine providing access to other traditional loans

The equity character extends the financing scope beyond direct mezzanine. This is because mezzanine changes the ratio of equity to debt on the balance sheet and thus can also allow bank lenders to provide fresh capital. Prior to including mezzanine, this may no thave been possible for the banks for regulatory reasons. For example, for every 1 euro of mezzanine could allow for 2 more euros of new loans to be raised.

Although mezzanine is standard practice in buy-outs of larger companies, in particular in the private equity sector, younger and dynamic medium-sized companies also use this form of financing to finance larger investments and rapid growth. Minimum amounts usually start at 5 million euros per mezzanine financing. Mezzanine providers are usually specialised Private Debt funds [more here: Private Debt] or institutional investors such as insurance companies – and last but not least the respective departments of some banks.

However, the higher risk for the creditors comes at a price increase compared to senior debt. Typical interest rates are higher than those for „standard“ loans, and flexible profit-sharing mechanisms are often added to this.

The

  • comparatively long tenors of usually seven to ten years,
  • the flexibility in the structuring and above all
  • the possibility of still raising new funds, if bank capital is exhausted
  • without further collateral and concessions on rights of co-determination / shareholder rights

are good reasons for mezzanine.

Doorlopend krediet

The revolving credit facility (also called working capital loan) is the overdraft for the company: quick help in case of short-term or unforeseen liquidity gaps. It is therefore a standard instrument of corporate financing. However, finding the right revolving credit facility and provider for your own business needs is not so easy.

Very high flexibility in terms of drawdown and repayment

Helps to bridge liquidity bottlenecks immediately and without much effort (once in place)

Available again immediately after repayment

No financing can be drawn and repaid as quickly as the revolving credit facility. And yet it can only ever be one building block in a company’s financing strategy – because the revolving credit facility is primarily intended for short-term financing. We support you in selecting the right bank with the right structure for you, even beyond your house bank.

Revolving credit facility: fast liquidity injection

What the overdraft facility is for private customers, the revolving credit facility or working capital loan offers business customers: Immediate availability as soon as the loan is needed – for example, to bridge a short gap between expenditure such as salaries and customer invoices. Ever so quickly the loan can be repaid. There is no need for a separate loan account; the revolving credit facility is managed via a current account. Unlike other loan types, there is no fixed repayment schedule or tenor.

However, the amount of the drawing limit (credit line) for the revolving credit facility, the interest rate and possible collateral must be agreed with the bank in advance. Pricings depend not least on the business risk of the company, for example cycliclity or seasonality.

Extension of the existing revolving credit facility possible

As soon as the current account has a negative balance, the revolving credit is drawn down and interest is charged accordingly. Interest is only charged for the period in which the account is „in the red“. The loan can be repaid in full or in part at any time. Even after repayment, the revolving credit is immediately available again and does not have to be applied for again, as is typical for other forms of loans.

It is sometimes also possible for a revolving credit to be extended beyond the agreed limit if the lending bank agrees and/or a new bank can be onboarded as a financing partner.

Typically, the bank expects the loan to be repaid in full within a certain period – usually after one month. The size oft he revolving credit line is often based on this expectation – the higher the regular payments on the account, the higher the line usually is. If the revolving credit is not repaid over a longer period of time, the bank could freeze the corresponding account.

Carrière

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Garantiebemiddeling via verzekeraars

Kautionsversicherung - Gracher Kredit- & Kautionsmakler

Garanties en borgstellingen laten stellen door een verzekeraar is de tegenhanger van bankgaranties. Twee grote voordelen van het stellen van garanties en borgstellingen via een verzekeraar: geen beperking van de kredietlimiet bij de bank en een hoge mate van flexibiliteit, vooral in het geval van bijzondere uitdagingen.

Toekomstperspectief

Hoewel de kosten voor het stellen van garanties via een verzekeraar voor een groot deel afhankelijk zijn van de kredietwaardigheid van de onderneming, wordt ook veel waarde gehecht aan het toekomstperspectief. Banken kijken vooral naar de historische gegevens en de totale zekerheidspositie. Verzekeringsmaatschappijen kunnen hierdoor tot een positievere beoordeling van uw bedrijf komen.

Geschikt voor bijzondere uitdagingen

Maar ook als uw kredietwaardigheid geen probleem is, dan kunnen of willen sommige banken niet meer het benodigde vermogen aanhouden om het volledige bedrag aan uitstaande garanties voor uw onderneming af te dekken. In dat geval vullen ze graag een deel van de garantiebehoefte in en laten ze de rest over aan een verzekeringsmaatschappij. Verzekeraars schrikken over het algemeen ook niet terug voor “lastige” landen en/of sectoren.

De voordelen van garantie via verzekeraars

Geen (negatieve) invloed op de op uw kredietlimiet of kredietbeoordeling

Ook geschikt voor “lastige” of risicogevoelige sectoren en bedrijfssituaties.

Fronting

Verzekeraars bieden daarnaast meer flexibiliteit als het gaat om fronting. Als een Nederlandse verzekeraar bijvoorbeeld geen vergunning heeft om in een bepaald land garanties af te geven, dan kan een daar gevestigde verzekeringsmaatschappij een garantie afgeven op verzoek van de Nederlandse verzekeraar. Verzekeraars accepteren ook fronting door banken als de opdrachtgever aandringt op het ontvangen van een bankgarantie. Fronting is overal ter wereld mogelijk zonder noemenswaardige kosten.

Looptijd

Een garantie of borgstelling van de verzekeraar heeft meestal een maximale looptijd tot tien jaar. Zulke lange looptijden zijn echter een uitzondering. Garanties zijn vaak gekoppeld aan de economische looptijd van het contract die over het algemeen slechts een paar jaar bedraagt.

Case Studies

Hier presenteren wij u de belangrijkste kenmerken van de aanvragen die wij hebben begeleid als Gracher Surety, de Garantie makelaar. Mocht u nog vragen hebben, neem dan gerust contact met ons op.

Key data

  • Sector: multinational corporation in the international food industry in the USA
  • Rating: BBB
  • M&A process of food company in EU (Brazilian company) in Summer 2019 – asset deal
  • Volume: USD 1.5 billion facility
  • Surety: 3 sureties bilateral

Situation

  • [CASE #1] had no equity or companies in EU
  • Difficulties to create an indemnity
  • Mistake in the SPA: all indemnities had to go back to a Brazilian company before closing
  • Deadline for the deal – 3 weeks

Issue 

  • Gracher came on board 3 weeks before closing the deal
  • [CASE #1] took over all facilities from a Brazilian company
  • 3 new facilities were created for the newly established company, which came into force with closing
  • A document was handed over to a Brazilian company – containing that in the event of closing all indemnities were worthless
  • All outstanding bonds were transferred into the new facility with closing
  • Compliance certificate for closing did not exist in the USA

Key data

  • Sector: Renewable Energy industry
  • Ownership: public traded company
  • Rating: BB+/BBB-
  • Timeline: Summer/ Autumn 2021
  • Volume: EUR 320 million
  • Surety:  5 sureties bilateral
  • Countries: worldwide (USA, NL, GER, UK, Spain)

Issue

  • Same tenor like bank consortium
  • ESG link – grid to ESG rating

Key data

  • Sector: engineering, construction and services company for the offshore energy industry
  • Rating: BBB

Situation

  • Order: USD 500-700 million (April 2020 corona pandemic)
  • Volume: 10% Performance Bond
  • Surety: Consortium – 2 sureties: 50%/50%
  • Beneficiary: Petrobras, Brazil

Issue

  • Maturity 4.5 years – most banks can go up to 3 years only
  • Oil sector – ESG, problem for many banks
  • Brazil – banks and sureties have full plafonds for Brazil
  • Timeline: 3 weeks; 15 people have been working 24/7
  • Legal advise to Petrobras for the bond wording
  • Separate indemnity for the daughter in Brazil
  • To solve all tax issues

Key data

  • Sector: Oil and Gas
  • Ownership: Private
  • Rating: BB
  • Countries: UK, Norway
  • Volume: USD 100 million
  • Surety: 2 bilateral – one Bond

Situation

  • Timeframe: Winter 2019 – Autumn 2021
  • Bond: DSA, Tariffs for pipelines

Issue

  • ESG (Oil)
  • Rating
  • No mother indemnity
  • Wording indemnity

Key data

  • Sector: Oil and Gas exploration
  • Ownership: Three large private equity companies
  • Rating: BB-
  • Volume: USD 150 million
  • Bond: DSA, decommission bonds
  • Countries: GER, UK, NL
  • Surety: 3 sureties bilateral

Issue

  • Oil/Gas – ESG issue
  • Pricing
  • Rating
  • Complex indemnity structure

Key data

  • Sector: mechanical engineering
  • Rating: BB
  • Volume: USD 150 million facility in USA
  • Timeline: from 2015 until today

Issue

  • Main contract with US Surety + EU indemnity

Gracher has 20 clients of this kind in USA/Canada.

Key data

  • Sector: Cosmetic industry
  • Ownership: Private Equity and investment advisory firm
  • Rating: CCC+
  • Volume: EUR 20 million for performance bond
  • Timeline: April 2021
  • Surety: 1 single surety

Issue

  • Rating CCC+
  • Sector
  • Restructuring case

Key data

  • Sector: Shipbuilding
  • Ownership: Private
  • Rating: nr (April 2020)
  • Order: advance payment bonds for a Post-Panamax cruise ship
  • Volume: EUR 150 million facility
  • Surety: consortium two sureties 60%/40%

Situation

  • Corona crisis in April 2020 hit the cruise industry hard
  • The cruise market has been brought almost to a standstill.

Key data

  • Sector: real estate investment company
  • Ownership: Publicly traded
  • Rating: BB-
  • Order: EUR 800 million project
  • Beneficiary: Pension fund
  • Facility: EUR  300 million
  • Surety: 2 sureties bilateral + consortium

Situation

  • Bond: 10% Performance Bond, volume EUR 80m
  • Ad hoc-fronting with 3 sureties
  • Timeline: 2019

Issue

  • Volume
  • Rating BB-

Key data

  • Sector: online sports betting and casinos
  • Ownership: Private Equity
  • Rating: B
  • Countries: EU wide
  • Bond: License Bond
  • Surety: 2 sureties 80/20

Situation

  • Volume: EUR 100+ million during corona pandemic
  • Timeline: June 2020 + Autumn 2021

Issue

  • Malta
  • Rating B
  • Gaming Industry

Key data

  • Sector: design and construction of façades and building envelopes
  • Ownership: Private, 100% [CASE #11]
  • Rating: A-
  • Surety: US surety – USD 150 million

Situation

  • Order: USD 50 million = one contract of USD 50m;
    one labor bond + one material bond of USD 50m each
    in total: USD 100m in 2 bonds for one single USD 50m project

Issue

  • Timeline: 4 weeks
  • No ultimate parent indemnity possible
  • Main facility – German law
  • US Indemnity – US law
  • Bond size does not fit to the revenues of [CASE #11]
  • Pricing: 1/3 of all EU offers
  • Offer: File rate

Internationaal netwerk

Wij zijn er voor u, wereldwijd. Onze vestigingen, ons internationale team en ons lidmaatschap van de Surety Alliance zorgen ervoor dat wij u binnen en buiten Europa zeer snel en vakkundig kunnen ondersteunen.

Wij zijn gevestigd in de volgende landen:

Duitsland: Trier (hoofdkantoor), Frankfurt a. Main (sales)

Bulgarije: Sofia, Stara Zagora (diensten en backoffice)

Nederland: Amsterdam (sales)

Oostenrijk: Wenen (co-working office)

Als lid van de Surety Alliance zijn wij indirect aanwezig in:

Verenigde Staten

Canada

Groot-Brittanië

Spanje

Mexico

Colombia

Brazilië

Italië.

Voor buitenlandse vestigingen bieden wij onze diensten aan in:

Heel Europa

Heel Zuid-Amerika

Australië

Hongkong

Singapore

Waardevolle tools, exclusief voor u

De omvang van onze portefeuille maakt ons tot een toonaangevend intermediair op het gebied van garanties en borgstellingen. Het geeft ons bovendien een volledig overzicht van de markt. Hierdoor kunnen wij voor u niet alleen de beste garantievoorwaarden bewerkstelligen, wij kunnen u ook helpen bij het (vroegtijdig) identificeren en beperken van eventuele risico’s. Hiervoor hebben we een aantal tools ontwikkeld die exclusief ter beschikking staan van onze klanten.