Admittedly, the buyout will be taxed less than your current income, with a possible equity kicker
when they flip the practice, which they hope to do three or four times!
One form of mezzanine financing consists of debt financing plus the so-called equity kicker
. An equity kicker
takes many forms, but always allows for the financing provider to benefit from growth through the acquisition of a small equity share in the future.
InnoVen, for instance, gets an equity kicker
in the investee company.
Lenders and savers assume comparatively less risk, but they also have a cap on their upside: the principal they will get back is limited to what they loaned, with no equity kicker
. Mian and Sufi give nary a mention to that concept.
The associated "cost" of this instrument may appear lower because of the lower coupon that would typically accompany a convertible, owing to the equity kicker
prevailing at the option of the noteholder.
For the angel and early-stage investor these return scenarios are highly attractive, providing repayment of principal that takes your risk off the table, monthly cash flows, a compelling return on investment and additional skin-in-the-game in the form of an equity kicker
(usually no more than 1%).
"The fund targets to pay an attractive running cash yield and is structured to benefit from the potential asset appreciation on vessels through an equity kicker
," according to a press release.
Investment Bank, unit of Qatar Islamic Bank said that the fund targets to pay an attractive running cash yield and is structured to benefit from the potential asset appreciation on vessels through an equity kicker
oAttractive return for early investors with equity kicker
Many nonpublic and closely held companies issue debt with an equity kicker
, such as a warrant.
In many such cases, equity has been written down to near zero, but company control (and an out-of-the-money equity kicker
) has remained with the original owner in the belief that the owner best knows how to manage a recovery.
In California, however, lenders are allowed to compensate for this limitation by obtaining shared appreciation--an equity kicker
that gives the lender a portion of any price appreciation in the underlying real estate.