Equity & Risk Capital

Risk capital is used to fund higher-risk, higher-reward investments. The funds can be deployed at various points in the capital structure depending on the risk appetite of the investor. The lower risk end of the spectrum tends to involve a form of junior or mezzanine debt with the higher risk level being pure equity.

The optimum capital structure analysis will often determine the appropriate level of risk capital to be deployed in the business. Different forms of risk capital include:

  • Junior debt – this has a lower priority than of another debt claim on the same asset or business in a default scenario and will be paid after senior debt in the payment waterfall.   This debt will command a higher return than senior debt and can often be sourced in the bond market as high yield bonds.
  • Mezzanine debt – this is a hybrid of debt and equity financing. Mezzanine financing is basically debt capital which will usually give the lender the right to convert to an ownership or equity interest in the company if there is a default. It will be subordinated to any senior debt but rank ahead of equity in the payment waterfall.
  • Equity – This is the riskiest form of capital investment as unlike debt it is not repaid to the investors in the normal course of business.  Equity financing can be raised in many ways from a private placement of stock to a public offering. There are also a number of different forms of equity finance such as preferential equity which ranks ahead of ordinary equity in the waterfall. Ultimately the value of equity capital in a business is determined by estimating the current market value of its assets minus all liabilities.

Centrus can advise companies all the way through your capital financing lifecycle from raising the initial equity finance to develop your business to determining the optimum capital structure as your business grows and raising any type of debt finance from senior to the most junior to ensure maximum return for shareholders.

Centrus has worked on a wide variety of innovative and complex financings across different jurisdictions and can ensure that the most efficient and appropriate financing partners are found for your business.

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Phil Jenkins

Phil Jenkins

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Geoff Knight

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Paul Stevens

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Robert St John

Robert St John

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