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Episode 33 — PE Views: How is Creative Collateral Use Changing PE Finance Options?

November 18, 2021
By pledging unencumbered assets, from idle ships to a private Caribbean island, debt issuers opened up new and creative avenues in finance during the pandemic that are widely applicable to PE.

Raising fresh capital for portfolio companies in times of financial stress is always a delicate balancing act between attracting new lenders and maintaining the strategic support of existing creditors. The almost instantaneous halt in cash flows and scramble for new capital injections precipitated by the COVID-19 pandemic has significantly changed traditional approaches to collateral — giving rise to new financing opportunities for sponsor-backed deals and businesses. Regardless of debt market buoyancy, these new financing techniques are here to stay, having demonstrated value in overcoming creditor skepticism during times of economic uncertainty and bringing a new way to increase leverage.

In this episode of Connected With Latham, London private equity partner Tom Evans speaks with London capital markets partner Francesco Lione about this shift in the debt finance markets and how PE dealmakers can work with legal counsel to take advantage of the opportunities these creative structures present.

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