Understanding Debt Capital Market Transaction Structuring: A Practical Approach

Capital is the lifeblood of every corporate organization. Every company needs capital to run its operations and achieve its corporate goals efficiently. There are typically three types of capital a company can raise: debt capital, equity capital, and hybrid capital (which is a mix of debt and equity capital). A company can raise equity capital by issuing shares. In contrast, debt capital can typically be raised via the capital market or as a loan from its shareholders (Shareholders' loan) or banks (traditional bank lending). Each capital raise option comes with its merits and demerits. For example, while shares issuance may dilute the ownership interest of the existing shareholders, the company is not required to repay the money (as in the case of a loan) because the company's success is also that of its shareholders. Shareholders are entitled to profit distribution in the form of dividends. Conversely, debt will not dilute the existing shareholders' interest but may