In the Press
April 4, 2024

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

Partners Ravi Chopra, Ed Saunders and Robert Emerson shared on Global Legal Insights the themes around preferred equity to elucidate its rightful place in the fund financing toolkit, to be used in conjunction with, or as an alternative to, NAV 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 and how it facilitates delivery of third-party financing at the desired entry point in a fund structure, from asset level right up to investor and sponsor level, and how it can be structured alongside credit arrangements.