Question
Which of the following can be considered as an example
of Quasi-Equity financing for a company?Solution
Quasi-equity refers to financial instruments that blend the features of both debt and equity. They are often unsecured, have flexible repayment schedules, and involve a higher level of risk compared to traditional debt, making them resemble equity in some aspects. Examples include: • Mezzanine debt: Typically unsecured and repaid based on company performance. • Preference shares with flexible repayment or dividend terms: Provide an equity-like risk capital without diluting ordinary shareholders’ control. • Subordinated (junior) debt: Ranks below other debts in case of liquidation, often structured with flexible terms. Thus, all of these qualify as quasi-equity instruments.
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