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Capital and Financing Options in ESOP Transactions

Date

November 19, 2020

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1 minute

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Many ESOP transactions are financed either by loans from banks or a combination of bank loans and subordinated promissory notes issued to the sellers in exchange for shares. In some cases, other forms of capital that are in a junior position to senior bank debt are raised to provide additional cash proceeds to the sellers. These forms of capital may include second-lien debt, mezzanine debt (unsecured debt subordinated to bank debt) or structured equity (unsecured debt subordinated to senior and mezzanine debt). David Solomon discusses these forms of capital in Chapter 7 of Leveraged ESOPs and Employee Buyouts.


Filed under: Corporate

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