4 ms·
Yikes. I feel like this is a smart way to bury the lede; > A very important consideration in structuring a bridge loan is what happens if the company is sold w
by keithwhor 4y ago
Yikes. I feel like this is a smart way to bury the lede;
> A very important consideration in structuring a bridge loan is what happens if the company is sold when the note is outstanding. […] I like somewhere between 2x and 3x depending on the circumstances.
Slippery slope; Fred just gave ammunition to a whole bunch of firms to start negotiating liquidation preferences on term sheets, for which the “standard” has been 1x for years.
- smartbettor 4y agoprices have been going up for years. the standard is gone.
- fairity 4y agoThe standard is 1x for regular financings, but bridge rounds tend to be more distressed, so I wouldn’t be surprised if market is more like 2x.
- rdli 4y agoI think the standard is fully convertible (i.e., you get your liquidation preference OR you convert) — a 1x as I think about it is you get your liquidation preference before you convert (i.e., two bites of the apple). Is that what you mean?
- rdli 4y agoOn a typical convertible note, I’d expect it to convert to equity on the same liquidation preference as the next round, and I do think even in this (bear) market I still think fully convertible deals are the norm.
- hn_throwaway_99 4y agoThis isn't the same things as standard liquidation preferences. Normally, liquidation preferences limit the downside for investors, but since investors hold equity they will participate in all of the upside. For a bridge loan it's different. The 2x/3x is not a liquidation preference really, because since the loan doesn't convert to equity in a sale, that's the maximum the bridge loan creditor can receive in a sale.
- Exness199507 4y ago