Back-leverage in Infra PE
Is it common to use back-leverage at the holdco level in order to decrease the equity check? Or would the sponsor rather make use of fund finance tools like pref equity and NAV loans? The only times I've seen back-leverage be used was with development deals involving solar tax equity, and it wasn't used to decrease the equity check.
It certainly is used. A lot of it occurs when you have multiple equity investors with different risk tolerances. I think it was used in the intel/Brookfield semiconductors plant (by Brookfield) but not 100%.
Bump
I work at a large renewables developer. We use back-leverage at the holdco level when we have tax equity in a deal.
But it sounds like you are talking about leverage at a higher level? Are you referring to leverage used by a cash equity purchaser to lever their investment?
Correct. Any insights?
Honestly not sure. I'll ask someone on my team if that's standard practice and update here.
Have been wondering myself if the PE shops that buy some/all of our equity stake in our projects post-COD are levered up. That would mean there are two debt facilities because we always use term debt or bond refi which is after tax equity but before cash equity in the cash waterfall.
A lot of the time you won't even know if a fund / your fund uses BL because it's often used to some degree to smoothen out LP capital calls (and what will drive differences between gross and net fund-level returns)
Our fund does this so they don't have to call forty people to tip in EUR 50k each
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