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capital

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associate
52 Points Posted on 04 March 2011

what do you mean by quasi capital?

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On 04 March 2011 at 15:54 Report
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CA CMA DISA(ICAI) B.COM
3956 Points Posted on 04 March 2011
  • The word quasi-capital means a series of financing methods the characteristics of which are between long-term credit and participation in the capital, which won it the colourful nickname "mezzanine financing".
  • They are also called "junior debts":
    • the mezzanine financing keeps of the loan the limited term inscribed in the contract and the at least partly guaranteed yield;
    • of the capital, they adopt the uncertainty of repayment ; these loans are indeed "subordinated" which means that in case of bankruptcy, they will be repaid only after discharge of the other debts of the company.
  • The subordination of the debt increases the risk incurred by the financing establishment that will demand a higher yield than within the framework of a traditional loan. The cost for the enterprise is hence more important, but is compensated by:
    • the greater credibility in the banks, reassured by the presence of a recognised external investor;
    • the capacity to borrow more, as upon the analysis of the indebtedness, quasi-capital is considered as capital and not as a loan.
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On 04 March 2011 at 17:36

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