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Debt Financing


One man's debt is another man's asset

Debt Financing

Debt financing occurs when a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.

What is Cost of Capital?
Cost of capital is the minimum rate of return that a business must earn before generating value. Before a business can turn a profit, it must at least generate sufficient income to cover the cost of the capital it uses to fund its operations. Cost of capital consists of both the cost of debt and the cost of equity used for financing a business. A company's cost of capital depends to a large extent on the type of financing the company chooses to rely on. The company may rely solely on equity or debt, or use a combination of the two.

The choice of financing makes the cost of capital a crucial variable for every company, as it will determine the company's capital structure. Companies look for the optimal mix of financing that provides adequate funding and that minimizes the cost of capital.

In addition, investors use cost of capital as one of the financial metrics they consider in evaluating companies as potential investments. The cost of capital figure is also important because it is used as the discount rate for the company's free cash flows in the DCF analysis model.

WACC

The most common approach to calculating the cost of capital is to use the Weighted Average Cost of Capital (WACC). Under this method, all sources of financing are included in the calculation and each source is given a weight relative to its proportion in the company's capital structure. WACC provides us a formula to calculate the cost of capital:

WACC formula

Cost of debt in WACC is the interest rate that a company pays on its existing debt. Cost of equity is the expected rate of return for the company's shareholders.

Debt is a cheaper source of financing as compared to equity. Companies can benefit from their debt instruments by expensing the interest payments made on existing debt and thereby reducing the company's taxable income. These reductions in tax liability are known as tax shields. Tax shields are crucial to companies because they help to preserve the company's cash flows and the total value of the company.

However, at some point, the cost of issuing additional debt will exceed the cost of issuing new equity. For a company with a lot of debt, adding new debt will increase its risk of default, the inability to meet its financial obligations. A higher default risk will increase the cost of debt, as new lenders will ask for a premium to be paid for the higher default risk. In addition, a high default risk may also drive the cost of equity up because shareholders will likely also expect a premium for taking on additional risk.

The emergence of non-bank lenders and challenger banks in the market place has not only provided competition on pricing but also access to a variety of new finance products. If you are looking to secure funding we are able to use our extensive experience and market insight to guide you through this process.

Debt Structure

Our capital sources provide solutions across the spectrum, from fully amortizing long-term debt and non-recourse construction transactions to a highly leveraged mezzanine or bridge deal. Because of the strength of our existing relationships with funding sources, we are often able to help facilitate debt placement opportunities at more favorable rates and terms than many of our clients could obtain independently.

We blend sophisticated capital markets expertise, with local market presence to negotiate customized financing packages that allow our clients to achieve their goals. We provide services in the below areas:

  •     Mortgage Origination
  •     Mezzanine Debt
  •     Secondary Financing
  •     Sale/Leaseback Financing
  •     Note Purchase/Loan Sale
  •     Market Insight

Our experienced team build robust, transparent financial models covering all circumstances and across a wide range of sectors. Our approach is to start with a clear understanding of the situation and design a bespoke model using proven methodologies and techniques. The advantages of our models include creating outputs and usability that are designed specifically for the user, as well as providing the flexibility of assumptions to perform sensitivity analysis.

Our experts partner with clients on corporate planning, providing perspective not only on immediate value and impact, but on long-term implications. We work closely with management and other advisers to leverage and complement their knowledge and ensure maximum impact, and actively support implementation and skill building.

Featured Experts - Debt Financing

Senior multi-disciplinary corporate and finance professionals with diverse geographic, sector and transaction focuses
Ajay Mavinkurve
Ajay is a seasoned senior-level corporate finance executive with 30+ years of diversified experience in Global Corporate Finance, IPOs, Corporate and Tax structuring, Deal structuring, Commercial Negotiation, Valuations, Venture and Private Equity syndication, M&A, Growth Strategy, Distressed Asset Management, Working Capital and Buy-outs for Small & Mid-sized Enterprises (SMEs).

Ajay
Mavinkurve

Managing Partner Corporate Advisory
London


Sabapaty (Saba) Suryanarayanan
Saba is a seasoned commercial and finance professional with 30+ years of experience in in C-suite roles spanning varied geographies and multiple industry segments, including Manufacturing, Trading, Media and Financial Services in areas such as Deal structuring, Commercial Negotiation, Growth Strategy, Distressed Asset Management, Working Capital Funding, and Buyouts.

Sabapaty (Saba)
Suryanarayanan

Managing Partner Commercial and Finance
Mumbai, India


Chennakeshav (Keshav) Adya
Chennakeshav (Keshav) is a seasoned business, marketing and technology executive with 20+ years of global corporate and entrepreneurial experience in building global companies from a concept and in leadership roles spanning M&A execution, deal origination, marketing, brand-building, market research and technology delivery.

Chennakeshav
(Keshav) Adya

Managing Partner Corporate Finance, M&A, Growth
Dubai & London


George Christelis
George is an experienced finance professional with 20+ years of experience in C-suite roles for listed medium/large sized businesses in sectors such as real estate, construction, engineering and logistics.

George
Christelis

Partner Southern African region
Johannesburg


Marco Salvini
Marco is a senior executive with 25+ years of experience in C-suite roles spanning Real Estate leadership, delivering strategy, transformational change and turnaround of underperforming portfolios, assets and companies. Previously, he was the CEO for AIG/Lincoln - AIG Global Real Estate (Italy), where he successfully navigated the 2008 financial crisis and following global recession

Marco
Salvini

Partner Real Estate
Milan & London


Vernon D Cruz
Vernon is a distinguished finance professional with 30+ years of experience in mid-sizes service organisations with demonstrated success in providing team leadership and development to foster growth. He has hands on experience in managing and running business with keen interest in Finance, Taxation, Legal, Commercial Negotiations, Commercial, Tourism & CSR.

Vernon
D'Cruz

Partner Commercial, Tourism & CSR
Mumbai


Freddie Tshiaba
Freddie Tshiaba is a senior business leader with 20+ years of significant experience helping investment banks, financial institutions, enterprise software companies and multi-national corporates with strategic initiatives, business development, digital transformation, product management, liquidity risk and treasury management.

Freddie
Tshiaba

Partner Corporate Finance
London


Subhash Baliga
Subhash is a seasoned senior-level corporate finance and private equity executive with 25+ years of experience in PE/VC Industry. For the past 16 years, he was a PE/VC Investor during which he made several investments with 3 private equity / venture capital funds. Besides the PE/VC Industry, he also worked in a senior role for Tata Steel and was Group CFO of the Essel Group of Companies.

Subhash
Baliga

Partner Private Equity
Mumbai


Carlos Dos Santos Leiria
Carlos is an experienced senior-level business executive with 20+ years of experience in C-suite roles focused on conception, implementation and decision-making related to international business strategy, operational and business development, and organization alignment and has a successful track record in challenging conditions in the Engineering and Construction sector.

Carlos Dos
Santos Leiria

Partner Green Energy
Jakarta, Indonesia


Rauf Akhundov
Rauf is a seasoned banker with 20+ years of international experience in C-suite roles spanning fundraising, strategic planning and budgeting, consumer, micro and corporate lending, network management, lobbying and relationship management with government officials in emerging markets.

Rauf
Akhundov

Partner Central Asia
Baku, Azerbaijan


Suryadeep Nain
Suryadeep is an experienced investment professional with 8+ years of experience across capital markets, investment banking, and private equity in India in areas such as fund raising, due-diligence, transaction structuring and implementation across number of industry segments such as construction, real-estate, infrastructure, industrials, and financial institutions.

Suryadeep
Nain

Director Private Equity
Delhi


A selection of completed transactions

Our team has facilitated a variety of successful transactions across sectors, geographies and complexities.

Working Capital for VFX and 3D firm.


Deal Region : Asia, Europe
Deal Size      : $ 20 million

Sector(s):
Media & EntertainmentTechnology
Expertise:
Working CapitalDebt FinancingDeal Strategy

Corporate Debt & Sales Tax benefits for Asia's largest private mining company with the largest investment in renewable energy.


Deal Region : Asia
Deal Size      : $ 150 million

Sector(s):
Metals & Mining Green Energy
Expertise:
Debt Financing Project Finance Deal Strategy

Represented a state-of-the-art Antibiotic Drugs company in a review by a financial institution and helped with their debt raise


Deal Region : Asia
Deal Size      : $ 16 million

Sector(s):
Pharma & Life Sciences
Expertise:
Debt FinancingProject FinanceDeal Strategy

Europe's leading clean energy provider for mid-sized businesses


Deal Region : Europe, Asia
Deal Size      : Confidential

Sector(s):
Green Energy
Technology
Expertise:
Debt Financing Invoice Discounting

Debt funding for reputed supplier of glass vials/ampoules to Pharma industry


Deal Region : Asia
Deal Size      : $ 10 million

Sector(s):
Industrial Manufacturing
Expertise:
Debt FinancingBusiness StrategyDeal Strategy

Debt funding for leading construction company


Deal Region : Asia
Deal Size      : $ 10 million

Sector(s):
Engineering & Construction
Expertise:
Debt FinancingBusiness StrategyDeal Strategy
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