There are different models for financing investment projects, potentially including different instruments and sources of funding. Companies usually obtain funding through the issuing of equity, debt (banking debt / bonds ) or convertible instruments. At Equilor we believe it is essential for the well-balanced operation of a company to find the ideal mix of these funding sources. Our task is to find the most appropriate instruments, and to organize and mobilize the necessary capital according to our clients’ needs.

Equity financing

Companies often choose equity financing as a means to raise the funds necessary for continuous growth. Equity financing is usually considered if debt or other obligations on the balance sheet are too high.. Businesses may obtain equity financing through:

• retaining profits in the business;
• issuing shares in a private placement; or
• selling new shares to the general public and investing institutions (public offerings).

It may seem that the easiest way to secure the equity necessary for operations is to retain profits in the business rather than distributing them to equity shareholders. But in fact the decision about the optimal capital structure and dividend policy requires not just expertise but an objective, independent point of view an investment adviser. Often, retained profits are not enough to exploit the growth opportunities in the market. In order to secure additional necessary funding it is important to consider the option of capital raising.

Stock issues can be done by private placements or in a form of public offerings. The process of private placements is much simpler than public offerings and it takes less time to complete. However the main disadvantage is that the company cannot advertise the offering and must make the transaction directly with the purchaser.

Public offerings are often issued by smaller, younger companies seeking capital to expand, but can also be undertaken by large privately owned companies looking to become publicly traded. Through public offerings that are associated with listings on the stock exchange a company is able to raise more capital than by private placement at morefavourable pricing. Furthermore there are several advantages of being a public company:

• cheaper access to capital;
• diversified equity base;
• liquidity for equity holders;
• media attention and increased public image;
• heightened consumer awareness and confidence;
• opportunity for stock swap acquisitions.

Equilor has extensive experience in organizing equity financing. In recent years we have taken part in major share transactions in the region and are looking forward to supporting future clients.through our extensive international relationships.

Debt financing

Bank financing

Under normal circumstances debt is mainly provided by banks, however, obtaining a bank loan is usually a prolonged process that requires thorough preparation and documentation. Furthermore the current much reduced lending activity of commercial banks often leads companies to search for other debt financing possibilities. An alternative solution for larger companies to diversify their capital structure may be the issuing of corporate bonds.

Corporate bonds

• the issue of bonds has a tax benefit because of the debt tax shield;
• debt does not dilute the owner's interest in the company;
• lenders (bond holders) are generally entitled only to the repayment of the agreed-upon principal of the bond plus interest, and have no direct claim on future profits of the business.

In order to decide between private and public bond issues, Equilor CF supports its clients’ financing process by performing a strategic review and assessment of their expectations. As a result we will formulate our client’s business objectives, determine capital needs, prepare confidential information and memoranda and identify financing sources.

In the last twelve months in Hungary, Equilor has organised bond issues of over 40M EUR despite very difficult financial conditions. With this performance Equilor has been one of the most active transaction advisers in the non-financial sector in that country.

Mezzanine financing

Mezzanine financing is a less well-known financing option in CEE, available both for privately held businesses and publicly traded companies. It is typically issued in the form of subordinated debt with equity participation to fund a growth opportunity, such as an acquisition, new product line, new distribution channel or plant expansion. Additionaly it can be utilised to enable management to buyout company owners for succession purposes. Generally speaking, mezzanine financing is a hybrid of debt and equity financing. It offers the features of both debt (regular interest and principal payments) and equity (warrants and options). Mezzanine debt is ranked behind senior debt but ahead of equity holders in terms of security.

MEZZANINE FILLS THE GAP BETWEEN SENIOR DEBT AND EQUITY

With our professional background and expertise our staff are ready to develop a tailor-made solution to our clients for them to receive the best terms and structure under the given market conditions.