You are here

PRIVATE DEBT IN EMERGING MARKETS LAID BARE

PRIVATE DEBT IN EMERGING MARKETS LAID BARE

PRIVATE DEBT IN EMERGING MARKETS LAID BARE

Discussion with Charlotte Henderson — Talking about the investment process for direct lending in emerging and frontier countries.

Special Situation

Special Situation

A special situation is an unusual event that compels investors to buy a stock or other asset in the belief that its price will rise. The special situation by definition has little to do with the underlying fundamentals of the stock or any other rationale that investors ordinarily use to select investments. It is an attempt to profit from a potential rise in valuation that the special situation presents.

Product Details

View more details

A special situation is an unusual event that compels investors to buy a stock or other asset in the belief that its price will rise. The special situation by definition has little to do with the underlying fundamentals of the stock or any other rationale that investors ordinarily use to select investments. It is an attempt to profit from a potential rise in valuation that the special situation presents.

Moratorium

Moratorium

A moratorium is a temporary suspension of an activity or law until future consideration warrants lifting the suspension, such as if and when the issues that led to moratorium have been resolved. A moratorium may be imposed by a government, by regulators, or by a business.

Product Details

View more details

A moratorium is a temporary suspension of an activity or law until future consideration warrants lifting the suspension, such as if and when the issues that led to moratorium have been resolved. A moratorium may be imposed by a government, by regulators, or by a business.

Insolvency

Insolvency

Insolvency is a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due. Before an insolvent company or person gets involved in insolvency proceedings, they will likely be involved in informal arrangements with creditors, such as setting up alternative payment arrangements. Insolvency can arise from poor cash management, a reduction in cash inflow, or an increase in expenses.

Product Details

View more details

Insolvency is a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due. Before an insolvent company or person gets involved in insolvency proceedings, they will likely be involved in informal arrangements with creditors, such as setting up alternative payment arrangements. Insolvency can arise from poor cash management, a reduction in cash inflow, or an increase in expenses.

Direct Lending

Direct Lending

Direct lending funds provide loans to middle-market companies that are originated and held by the lender rather than broadly syndicated; they are typically illiquid, senior secured loans with 5-7-year maturities and floating coupon rates, and returns expectations are in the high single digits to low double digits.

Product Details

View more details

Direct lending funds provide loans to middle-market companies that are originated and held by the lender rather than broadly syndicated; they are typically illiquid, senior secured loans with 5-7-year maturities and floating coupon rates, and returns expectations are in the high single digits to low double digits.

Dilution

Dilution

A reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares. The Alternative Oxford Private Equity Dictionary

Product Details

View more details

A reduction in the percentage ownership of a given shareholder in a company caused by the issuance of new shares. The Alternative Oxford Private Equity Dictionary

Growth capital

Growth capital

The sale of equity in a (typically) privately held operating company, frequently one that is profitable, to raise funds for ‘growth’: i.e. increase production capacity, supply working capital, or further develop the product. Both venture capital funds and mid-market buyout funds do growth capital investing. This is loved by the public because it funds growth and expansion, unlike LBO investing which has a largely negative public image. The Alternative Oxford Private Equity Dictionary

Product Details

View more details

The sale of equity in a (typically) privately held operating company, frequently one that is profitable, to raise funds for ‘growth’: i.e. increase production capacity, supply working capital, or further develop the product. Both venture capital funds and mid-market buyout funds do growth capital investing. This is loved by the public because it funds growth and expansion, unlike LBO investing which has a largely negative public image. The Alternative Oxford Private Equity Dictionary

All Seas Capital

All Seas Capital

All Seas Capital is a pan-European private capital fund that provides flexible long-term financing solutions to leading businesses.

Product Details

View more details

All Seas Capital is a pan-European private capital fund that provides flexible long-term financing solutions to leading businesses.

Asset Management

Asset Management

Asset management is the direction of all or part of a client's portfolio by a financial services institution, usually an investment bank, or an individual. Institutions offer investment services along with a wide range of traditional and alternative product offerings that might not be available to the average investor.

Product Details

View more details

Asset management is the direction of all or part of a client's portfolio by a financial services institution, usually an investment bank, or an individual. Institutions offer investment services along with a wide range of traditional and alternative product offerings that might not be available to the average investor.

Standstill Agreement

Standstill Agreement

A standstill agreement is a contract that contains provisions that govern how a bidder of a company can purchase, dispose of, or vote stock of the target company. A standstill agreement can effectively stall or stop the process of a hostile takeover if the parties cannot negotiate a friendly deal.

Product Details

View more details

A standstill agreement is a contract that contains provisions that govern how a bidder of a company can purchase, dispose of, or vote stock of the target company. A standstill agreement can effectively stall or stop the process of a hostile takeover if the parties cannot negotiate a friendly deal.

Senior Bank Loan

Senior Bank Loan

A senior bank loan is a debt financing obligation issued to a company by a bank or similar financial institution and then repackaged and sold to investors. The repackaged debt obligation consists of multiple loans. Senior bank loans hold legal claim to the borrower's assets above all other debt obligations.

Product Details

View more details

A senior bank loan is a debt financing obligation issued to a company by a bank or similar financial institution and then repackaged and sold to investors. The repackaged debt obligation consists of multiple loans. Senior bank loans hold legal claim to the borrower's assets above all other debt obligations.

Mezzanine

Mezzanine

The layer of debt that sits in between senior debt and equity. With much fewer rights than senior debt, it carries a higher interest rate. Depending on negotiations, mezzanine can include cash paying interest, rolled up interest (not paid until the debt is redeemed), and occasionally warrants on the equity of the business. The providers of mezzanine debt broaden out from banks, to include mezzanine funds and occasionally hedge funds. The Alternative Oxford Private Equity Dictionary

Product Details

View more details

The layer of debt that sits in between senior debt and equity. With much fewer rights than senior debt, it carries a higher interest rate. Depending on negotiations, mezzanine can include cash paying interest, rolled up interest (not paid until the debt is redeemed), and occasionally warrants on the equity of the business. The providers of mezzanine debt broaden out from banks, to include mezzanine funds and occasionally hedge funds. The Alternative Oxford Private Equity Dictionary

Definition Return On Debt (ROD)

Definition Return On Debt (ROD)

Return on debt (ROD) is a measure of profitability with respect to a firm's leverage. Return on debt shows how much the usage of borrowed funds contributes to profitability, but this metric is uncommon in financial analysis. Analysts prefer return on equity (ROE) or return on capital (ROC), which includes debt, instead of ROD.

Product Details

View more details

Return on debt (ROD) is a measure of profitability with respect to a firm's leverage. Return on debt shows how much the usage of borrowed funds contributes to profitability, but this metric is uncommon in financial analysis. Analysts prefer return on equity (ROE) or return on capital (ROC), which includes debt, instead of ROD.

Leveraged Buyout (LBO)

Leveraged Buyout (LBO)

A takeover of a company, using a high proportion of borrowed funds. Generally, the target company’s assets act as the collateral for the loans taken out by the acquiring group. The acquiring group then repays the loan from the cash flow of the acquired company. For example, a group of investors may borrow funds, using the assets of a company as collateral, in order to take over the company. Or the management of a company may use this vehicle as means to gain control of the company.

Product Details

View more details

A takeover of a company, using a high proportion of borrowed funds. Generally, the target company’s assets act as the collateral for the loans taken out by the acquiring group. The acquiring group then repays the loan from the cash flow of the acquired company. For example, a group of investors may borrow funds, using the assets of a company as collateral, in order to take over the company. Or the management of a company may use this vehicle as means to gain control of the company.

BOARD OBSERVER RIGHTS

BOARD OBSERVER RIGHTS

Board observer rights often give observers the right to be present and participate during Board meetings and report back on relevant happenings to other members of their investment firm; observers are not afforded voting rights. Likewise, the observer does not have the fiduciary duties that members of the board have.

Product Details

View more details

Board observer rights often give observers the right to be present and participate during Board meetings and report back on relevant happenings to other members of their investment firm; observers are not afforded voting rights. Likewise, the observer does not have the fiduciary duties that members of the board have.

Emerging Market Bond

Emerging Market Bond

An emerging market bond—the fixed income debt that is issued by countries with developing economies as well as by corporations within those nations—have become increasingly popular in investor portfolios in recent years. Their traction has been attributed to the bonds' rising credit quality and their higher yields, relative to U.S. corporate and Treasury bonds. However, higher returns often come with an increased level of risk, and emerging market issues tend to carry higher risks than domestic debt instruments.

Product Details

View more details

An emerging market bond—the fixed income debt that is issued by countries with developing economies as well as by corporations within those nations—have become increasingly popular in investor portfolios in recent years. Their traction has been attributed to the bonds' rising credit quality and their higher yields, relative to U.S. corporate and Treasury bonds. However, higher returns often come with an increased level of risk, and emerging market issues tend to carry higher risks than domestic debt instruments.

Business Process Outsourcing (BPO)

Business Process Outsourcing (BPO)

Business process outsourcing (BPO) is a method of subcontracting various business-related operations to third-party vendors. Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of services, as well.

Product Details

View more details

Business process outsourcing (BPO) is a method of subcontracting various business-related operations to third-party vendors. Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of services, as well.

ESG

ESG

Environmental, Social and Governance. Essential topics and increasingly a must in fundraising. A way for finance professionals to feel they contribute positively to society, and maybe they do after all, sometimes. In practice, the notion of ESG has evolved to refer to the part of risk management and discussions related to ESG-related topics. For example, an ESG report would discuss how a given company is dealing with risks associated with climate change.

Product Details

View more details

Environmental, Social and Governance. Essential topics and increasingly a must in fundraising. A way for finance professionals to feel they contribute positively to society, and maybe they do after all, sometimes. In practice, the notion of ESG has evolved to refer to the part of risk management and discussions related to ESG-related topics. For example, an ESG report would discuss how a given company is dealing with risks associated with climate change.

Fixed Income Trading

Fixed Income Trading

Fixed income trading involves the buying and selling of securities including government and corporate bonds. Learn the basics of those securities and how they are impacted by government and fiscal policy and other macroeconomic indicators.

Product Details

View more details

Fixed income trading involves the buying and selling of securities including government and corporate bonds. Learn the basics of those securities and how they are impacted by government and fiscal policy and other macroeconomic indicators.

Credit Market

Credit Market

Credit market refers to the market through which companies and governments issue debt to investors, such as investment-grade bonds, junk bonds, and short-term commercial paper. Sometimes called the debt market, the credit market also includes debt offerings, such as notes and securitized obligations, including collateralized debt obligations (CDOs), mortgage-backed securities, and credit default swaps (CDS).

Product Details

View more details

Credit market refers to the market through which companies and governments issue debt to investors, such as investment-grade bonds, junk bonds, and short-term commercial paper. Sometimes called the debt market, the credit market also includes debt offerings, such as notes and securitized obligations, including collateralized debt obligations (CDOs), mortgage-backed securities, and credit default swaps (CDS).

Preferred Equity

Preferred Equity

Synonymous of preferred stock; ii) A secondaries halfway house, an investor will accept an immediate pay-out from the preferred equity buyer and will receive any future profits from the fund’s portfolio, but only once the preferred equity buyer has been paid out. This can be used as a mechanism to achieve some liquidity, without actually disposing of any assets. The Alternative Oxford Private Equity Dictionary

Product Details

View more details

Synonymous of preferred stock; ii) A secondaries halfway house, an investor will accept an immediate pay-out from the preferred equity buyer and will receive any future profits from the fund’s portfolio, but only once the preferred equity buyer has been paid out. This can be used as a mechanism to achieve some liquidity, without actually disposing of any assets. The Alternative Oxford Private Equity Dictionary

Covenant

Covenant

The promise made by the borrower to the lender in a loan agreement. The most important of these are financial covenants, for example, a promise that the ratio of debt to EBITDA will not exceed a certain level. If a covenant is breached, the bank can call in the loan or enforce its security. Banks and bondholders have different kinds of covenants. Banks have “maintenance covenants”. These have teeth: they actively require a company to maintain certain ratio levels. Bondholders generally have “incurrence covenants”. These are relatively toothless, because they kick in only if the borrower wants to make a change (for example, “incur” new debt).  

Product Details

View more details

The promise made by the borrower to the lender in a loan agreement. The most important of these are financial covenants, for example, a promise that the ratio of debt to EBITDA will not exceed a certain level. If a covenant is breached, the bank can call in the loan or enforce its security. Banks and bondholders have different kinds of covenants. Banks have “maintenance covenants”. These have teeth: they actively require a company to maintain certain ratio levels. Bondholders generally have “incurrence covenants”. These are relatively toothless, because they kick in only if the borrower wants to make a change (for example, “incur” new debt).  

Ownership Restrictions

Ownership Restrictions

FTSE Russell’s index methodology takes account of the restrictions placed on the equity holdings of foreign investors in a company where these have been imposed by a government, regulatory authority, or the company's constitution.

Product Details

View more details

FTSE Russell’s index methodology takes account of the restrictions placed on the equity holdings of foreign investors in a company where these have been imposed by a government, regulatory authority, or the company's constitution.

What’s A Private Equity Deal

What’s A Private Equity Deal

Private equity deals occur when an investment deal takes place with capital that is not listed on a public exchange. Typically, private equity funds or investors invest in undervalued private entities and revamp them prior to becoming public companies.

Product Details

View more details

Private equity deals occur when an investment deal takes place with capital that is not listed on a public exchange. Typically, private equity funds or investors invest in undervalued private entities and revamp them prior to becoming public companies.

Cash Flow Statement

Cash Flow Statement

A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.

Product Details

View more details

A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.

Due Diligence

Due Diligence

One of the most important and lengthy processes in an M&A deal is Due Diligence. The process of due diligence is something that the buyer conducts to confirm the accuracy of the seller’s claims. A potential M&A deal involves several types of due diligence. CLICK LISTEN TO HEAR LUDO'S PODCAST

Product Details

View more details

One of the most important and lengthy processes in an M&A deal is Due Diligence. The process of due diligence is something that the buyer conducts to confirm the accuracy of the seller’s claims. A potential M&A deal involves several types of due diligence. CLICK LISTEN TO HEAR LUDO'S PODCAST

Audit

Audit

The term audit usually refers to a financial statement audit. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. The audit can be conducted internally by employees of the organization or externally by an outside Certified Public Accountant (CPA) firm.

Product Details

View more details

The term audit usually refers to a financial statement audit. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. The audit can be conducted internally by employees of the organization or externally by an outside Certified Public Accountant (CPA) firm.

Private Equity

Private Equity

Private Equity: Equity securities of companies that have not gone public (i.e., are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer without the help of the stock market. In addition, there are many transfer restrictions on private securities. The Alternative Oxford Private Equity Dictionary.

Product Details

View more details

Private Equity: Equity securities of companies that have not gone public (i.e., are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer without the help of the stock market. In addition, there are many transfer restrictions on private securities. The Alternative Oxford Private Equity Dictionary.

Downside Protection

Downside Protection

Downside protection on an investment occurs when the investor or fund manager uses techniques to prevent a decrease in the value of the investment. It is a common objective of investors and fund managers to avoid losses and many instruments can be used to achieve this objective. The use of options or other hedging instrument in order to limit or reduce losses in the case of a decline in the value of stock is very common.

Product Details

View more details

Downside protection on an investment occurs when the investor or fund manager uses techniques to prevent a decrease in the value of the investment. It is a common objective of investors and fund managers to avoid losses and many instruments can be used to achieve this objective. The use of options or other hedging instrument in order to limit or reduce losses in the case of a decline in the value of stock is very common.

Emerging Market Economy

Emerging Market Economy

An emerging market economy is the economy of a developing nation that is becoming more engaged with global markets as it grows. Countries classified as emerging market economies are those with some, but not all, of the characteristics of a developed market.

Product Details

View more details

An emerging market economy is the economy of a developing nation that is becoming more engaged with global markets as it grows. Countries classified as emerging market economies are those with some, but not all, of the characteristics of a developed market.

Charlotte Henderson

Charlotte Henderson

Broad experience in corporate finance, direct lending, acquisition finance, mergers and acquisitions, private equity and debt capital markets. Significant experience negotiating, structuring and implementing new money deals as well as restructurings and/or distressed debt situations.

Product Details

View more details

Broad experience in corporate finance, direct lending, acquisition finance, mergers and acquisitions, private equity and debt capital markets. Significant experience negotiating, structuring and implementing new money deals as well as restructurings and/or distressed debt situations.

Said Business School

Said Business School

This year we are celebrating 25 years since we were formally founded. We have evolved to be one of the elite business schools of the world, embedded in the world’s top University, and aspiring to be a model of purposeful leadership. We have a well-deserved reputation for excellence.

Product Details

View more details

This year we are celebrating 25 years since we were formally founded. We have evolved to be one of the elite business schools of the world, embedded in the world’s top University, and aspiring to be a model of purposeful leadership. We have a well-deserved reputation for excellence.

Ludovic Phalippou

Ludovic Phalippou

Ludovic is currently Head of the FAME Group at Saïd Business School and specialises in private equity and asset management. Ludovic is the author of the bestseller 'Private Equity Laid Bare', and professor of Financial Economics at Saïd Business School, University of Oxford. He specialises in private market investments with a focus on fee tracking, interest alignment, and return benchmarking.

Product Details

View more details

Ludovic is currently Head of the FAME Group at Saïd Business School and specialises in private equity and asset management. Ludovic is the author of the bestseller 'Private Equity Laid Bare', and professor of Financial Economics at Saïd Business School, University of Oxford. He specialises in private market investments with a focus on fee tracking, interest alignment, and return benchmarking.

WHO’S LUDO?

WHO’S LUDO?

Over the last twenty years, Ludo has been actively researching the private equity industry.

Product Details

View more details

Over the last twenty years, Ludo has been actively researching the private equity industry.