Non-sponsored finance

Non-sponsored finance, or sponsorless financing, refers to debt granted to a family-owned, management-owned or listed company that no private equity fund controls. For ECB Banking Supervision, a private equity fund owns the borrower when it controls it or holds more than 50% of its equity. In France, 27% of the transactions of private debt funds in 2024 were completed without an equity investor around the table, compared with an average of 39% from 2020 to 2023. The ECB classes as a leveraged transaction any loan to a borrower that a sponsor controls, whatever its leverage. For a company without a sponsor, this classification applies only above 4x total debt to EBITDA. The company has no financial shareholder tasked with injecting funds in the event of a covenant breach or with organising an exit in the medium term. Lenders examine the family governance, the succession of the head of the company, the quality of reporting and the dividend policy. For you, this type of debt makes it possible to finance an acquisition, to buy out minority shareholders or to refinance without opening up the share capital. The equity cure is negotiated with the family shareholders as the providers of funds.

A family-owned mid-sized company with €250m of revenue and €30m of EBITDA raises €90m of unitranche debt over seven years. The funds serve to buy out the 30% held by one branch of the family and to refinance €25m of existing loans. Leverage comes out at 3.0x. The agreement caps dividends at 30% of net income as long as leverage exceeds 2.5x.

• The governance and the succession plan presented to lenders.
• The quality and frequency of financial reporting.
• A dividend policy compatible with repayment.
• The ability of the family shareholders to make an equity cure.
• Change of control clauses adapted to a family succession.