Page 7 - MTIA Summer 2022 Market Brief
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Holistic Approaches and Hybrid Financing
Factors contributing to Finally, the proliferation of debt and equity capital products and the rise of private
hybrid structures include:
non-bank lenders (see “The Evolving Landscape of Private Lending”) also create
• Tighter bank lending seemingly endless combinations for borrowers, from those with the highest
credit quality to those with high risk. In our roles as agent and trustee across a
• Accumulated private wide range of transactions, we are finding strong demand for hybrid solutions.
dry powder
• Credit manager loan For lenders, hybrid financing allows banks to maintain relationships with clients
aggregation while sharing the risks of larger or riskier loans with other lenders. Private or
non-bank lenders, on the other hand, have an opportunity to participate in larger,
• Insurance company often more lucrative, loan transactions that might otherwise be beyond their
participation
reach. Finally, noteholders can broaden the options available for their fixed-
income strategies.
Three Hybrid Transaction Scenarios
From a capital raising perspective, hybrid financing offers several compelling
advantages. It expands access to capital and creates flexibility in structuring the
financing to meet their specific needs and circumstances. This flexibility can take
various forms, such as adjusting the proportion of loans to bonds, bank to non-
bank financing, negotiating repayment terms, setting multiple tenors, or
tailoring documentation.
Components of a Hybrid Transaction
Bank Loans
Credit Broadly
Syndicated
Manager Borrower Loans
Private
Lending
HYBRID STRUCTURE
SPV Issuer Loans
Notes
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