Concorde Capital raises $50 mln for hybrid financing projects amid coronavirus crisis
Concorde Capital investment company (Kyiv) intends to act as a financial adviser in attracting and structuring hybrid financing for Ukrainian companies experiencing problems with access to capital amid coronavirus crisis and raised $50 million for such bridge financing, Founder and Head of Concorde Capital Ihor Mazepa has told Interfax-Ukraine.
"Despite all the current events, Ukraine still has a large stratum of non-poor people who previously invested in property and received some rental income. Now this market has fallen, deposit rates in commercial banks have also fallen, that is a lot of instruments that were working two months ago, it turned out to be non-working. However, there is a need to continue to invest further," he said about the fund's sources.
Mazepa said that during coronavirus crisis, the traditional activity of investment companies – Initial Public Offering (IPO), the issue of eurobonds – "literally multiplied by zero over a night."
"And what has appeared? For example, a story of organizing access to financing has arisen. Amid the crisis, many companies will face problems of attracting capital from traditional sources due to high debt or due to market conditions," the head of Concorde Capital said.
According to him, a lack of collateral or a conservative assessment of cash flows by banks will not allow enterprises to count on obtaining a loan, while attracting a private equity fund will no longer be appropriate for entrepreneur-borrowers because of the low valuation of their business.
"Under these conditions, hybrid tools of raising financing are becoming relevant and include: mezzanine financing, convertible loans, profit participating loans, and others. Hybrid financing tools are something between a bank loan and direct investment in a company," Mazepa said.
He said that, as a rule, hybrid financing tools are a combination of debt and participation in the company's capital or profit; they are widely used at various stages of the company's development, and are especially relevant in cases when the business is under pressure.