Any Preference? Preferred Equity as Part of the Financing Toolkit (Global Legal Insights)

In their recent Global Legal Insights article, Goodwin Private Equity and Private Investment Funds partners Ravi Chopra, Ed Saunders, and Robert C. Emerson discuss the key themes around preferred equity to help situate it in the fund financing tool kit, whether in conjunction with or as an alternative to net asset value (NAV) financing. In the context of private investment funds, with greater sophistication and ingenuity of sponsors in optimizing their business opportunities over recent years, there has been an increased diversification of the equity stack at both portfolio and platform levels. Fewer exits across 2022–2024 have generated a need to find alternative sources of capital for investment or to provide liquidity. With valuation uncertainty, and interest rate and foreign exchange market volatility, managers have expanded their focus on intermediate capital, with an increased willingness to consider both debt and equity solutions. Some products seen in the market look to cherry-pick the most attractive features of the two, including “off to the side” NAV financing secured not over a whole portfolio but a preferred interest at the level of a portfolio aggregator, as an established liquidity solution. Sponsors also continue to seek alternative ways to finance platform-level strategic opportunities and initiatives.

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