Private placement issues can be structured with less restrictive covenants than
public issues and can carry significantly lower transactional costs. Such
issues can be structured at various points along the debt ladder to meet
specific requirements of the issuer as well as that of the investors with
maturities ranging between 2 to 30 years.
Equity transactions and hybrids
are also common. A private placement candidate company typically has a net
worth of at least $15 Million with annual sales of $30 Million. This may
not always be the case, however, because private placements can be used in
smaller startup or seed capital rounds.
Private placements are the
issuances of securities in transactions that do not occur on a public exchange.
A company does not have to be public in order to complete a private placement;
private companies do them all the time.
In fact by definition, all stock
issuances by privately held companies are privately placed. But it is not
widely known that a public company can issue shares from its treasury in the
form of a private placement as well.