Bridge loan - Corporate Finance (Simple Quick Loan)
Bridge loan - Corporate Finance (Simple Quick Loan)
Corporate Financial
Bridge loans are utilized in venture capital and additional corporate finance for
a number of purposes:
- To inject a small amount of cash to carry a company in order that it does not
run from cash between successive main private equity financings
- To transport distressed companies while trying to find an acquirer or bigger
investor (in which case the lending company often obtains a considerable equity
position in reference to the loan)
- Like a final debt financing to transport the company through the actual immediate
period before a preliminary public offering or a good acquisition.
Example
In Dec 2010, Kohlberg Kravis Roberts (KKR) as well as partners marketed a
bridge loan because of its upcoming acquisition of Delete Monte Foods. As is actually common
in such instances, KKR planned for the actual newly private company in order to borrow money by
giving corporate bonds. To ensure the cash would be available, KKR searched for
$1. 6B in link loan guarantees, for which it promised to pay for 8. 75%
interest with regard to 60 days and 11. 75% after that. At KKR's option, these types of loans
could then end up being replaced with eight-year business bonds (in effect, the put
option) paying 11. 75%. In substitution for the loans and ensures, KKR was
offering approximately 2% in fees.
Corporate Financial
Bridge loans are utilized in venture capital and additional corporate finance for
a number of purposes:
- To inject a small amount of cash to carry a company in order that it does not
run from cash between successive main private equity financings
- To transport distressed companies while trying to find an acquirer or bigger
investor (in which case the lending company often obtains a considerable equity
position in reference to the loan)
- Like a final debt financing to transport the company through the actual immediate
period before a preliminary public offering or a good acquisition.
In Dec 2010, Kohlberg Kravis Roberts (KKR) as well as partners marketed a
bridge loan because of its upcoming acquisition of Delete Monte Foods. As is actually common
in such instances, KKR planned for the actual newly private company in order to borrow money by
giving corporate bonds. To ensure the cash would be available, KKR searched for
$1. 6B in link loan guarantees, for which it promised to pay for 8. 75%
interest with regard to 60 days and 11. 75% after that. At KKR's option, these types of loans
could then end up being replaced with eight-year business bonds (in effect, the put
option) paying 11. 75%. In substitution for the loans and ensures, KKR was
offering approximately 2% in fees.
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