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Capital structure: Difference between revisions
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{{a| | {{a|banking|}}{{quote|''They asked me where I thought I stood in the organisation. I said I was [[senior unsecured]]. They fired me — for insubordination.'' | ||
::—{{author|Hunter Barkley}}’s forthcoming {{br|The ISDA Protocol}} (as yet unpublished and, come to think of it, unwritten)}} | |||
::—{{author|Hunter Barkley}}’s forthcoming {{br|The ISDA Protocol}} (as yet unpublished and, come to think of it, unwritten) | {{d|Capital structure|ˈkæpɪtl ˈstrʌkʧə/|n|}} | ||
Of a | Of a [[corporation]], the arrangement, priority and ranking of its [[shareholder]]s, [[creditor]]s and [[debenture]]holders. Usually, common shareholders at the bottom, then [[preferred shareholder]]s, then [[subordinated]] creditors, then unsecured (aka “ordinary”) [[Creditor|creditors]], then [[Secured loan|secured]] creditors. | ||
That kind of thing. | |||
When you have a convoluted corporate structure — hey: who doesn’t? — then the arrangement between the various entities in your group of shareholdings, inter-company loans, [[parental guarantee]]s and so on can be quite the game of pan-dimensional chess. | |||
===The [[capital structure]], charted=== | |||
Within a given [[legal entity]], as follows: | |||
{| class="wikitable" | {| class="wikitable" | ||
|- style="vertical-align:top;" | |- style="vertical-align:top;" | ||
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| [[Preference share]]s || In front of ordinary shareholders, behind everyone else. || A form of equity, but where you get some assurance of a return before the common stockholders, (but in return you do not get any equity upside). some funds are structured as pref shares. Not sure why. | | [[Preference share]]s || In front of ordinary shareholders, behind everyone else. || A form of equity, but where you get some assurance of a return before the common stockholders, (but in return you do not get any equity upside). some funds are structured as pref shares. Not sure why. | ||
|- style="vertical-align:top;" | |- style="vertical-align:top;" | ||
| [[Shareholder|Common equity]]|| Outright last. || Not, technically, a creditor at all, but an ''owner''. Good news: your claim is unlimited; you are not ''owed'' anything; when all is said and done, you ''own'' it. Bad news: all has to be said and done first. You only get to work out ''what'' you own after all the creditors have | | [[Shareholder|Common equity]]|| Outright last. || Not, technically, a [[creditor]] at all, but an ''owner''. Good news: your claim is unlimited; you are not ''owed'' anything; when all is said and done, you ''own'' it. Bad news: all has to be said and done first. You only get to work out ''what'' you own after all the creditors have been at all the company’s assets with the wire-brush and Dettol and taken what’s due to them. | ||
|} | |} | ||