A Preferred Approach? Assessing Preferred Equity as Part of the Financing Toolkit (Global Legal Insights)

In their recent Global Legal Insights article, Goodwin partners Ravi Chopra, Ed Saunders, and Robert C. Emerson share the themes around preferred equity to elucidate its rightful place in the fund financing tool kit: to be used in conjunction with, or as an alternative to, net asset value financing. Private investment funds have seen increased diversification of their equity stack due to fewer exits and valuation uncertainty. Managers are now considering both debt and equity solutions, with a focus on preferred equity. This allows sponsors to expand their capital stack by interposing new investors between debt and common equity, allowing for better cash flow and cost of capital tuning. Preferred equity is nothing new — preferred stock and contractual waterfalls are well established. What’s more exciting is how it facilitates delivery of third-party financing at the desired entry point in a fund structure, from the asset level right up to the investor or sponsor level, and how it can be structured alongside credit arrangements to more finely tune cash inflows, outflows, and the cost of capital.

Read the full analysis: “A Preferred Approach? Assessing Preferred Equity as Part of the Financing Toolkit” (Global Legal Insights)