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Structure a $100M+ U.S. recapitalization with senior debt, private credit and preferred equity while managing cash flow, liens and dilution.
A $100 million, $250 million or larger recapitalization is rarely a matter of finding one lender willing to write one check.
At this scale, the more important question is how much capital should sit in each part of the capital structure.
A U.S. company may combine senior secured debt, private credit and preferred equity to refinance existing obligations, create shareholder liquidity, fund acquisitions, simplify a fragmented balance sheet or provide additional growth capital. Each source affects cash flow, control, collateral and future refinancing differently.
Quick Answer: A $100M+ U.S. recapitalization is usually a capital stack, not one loan: senior secured debt for lower-cost leverage, private credit for flexibility or additional debt capacity, and preferred equity when the company needs capital without matching debt service. The right mix depends on sustainable cash flow, collateral, leverage, control and the planned exit.
A recapitalization changes how a business is financed without necessarily changing the underlying operating company.
For example, a company might raise $180 million of new capital to repay $110 million of existing loans, distribute $30 million to shareholders and retain $40 million for acquisitions or working capital.
The new capital might come from several sources rather than a single facility.
A recapitalization can make sense when a company wants to:
It should not be used simply to conceal continuing operating losses. If the underlying business consistently consumes cash before financing costs, adding leverage may postpone rather than solve the problem.
The three categories solve different problems, and one important distinction is often missed: private credit describes a source of capital, not necessarily its lien position.
A private credit fund can provide first-lien senior debt, unitranche financing, second-lien debt or another customized structure.
Senior debt normally occupies the first-loss-protected position in the debt stack because the lender has the highest contractual payment priority and frequently a first-priority security interest in agreed collateral.
For a larger company, senior financing may include a revolving credit facility, term loan or multiple facilities.
It will generally offer a lower required return than structurally junior capital, all else being equal. In exchange, lenders may require tighter leverage limits, minimum coverage metrics, restrictions on distributions, reporting requirements and collateral protections.
Private credit becomes particularly relevant when a transaction does not fit neatly inside conventional bank parameters or when the company values customized documentation, greater leverage capacity or a more concentrated lender group.
The Federal Reserve reported in its May 2026 Financial Stability Report that private credit loans represented approximately $1.4 trillion, or 10% of total debt of U.S. nonfinancial corporations, based on the latest data from the second half of 2025. The Fed defines private credit as loans originated by nonbanks and negotiated bilaterally between borrowers and lenders.
Private credit can provide structures such as unitranche debt, delayed-draw facilities and junior debt. Flexibility generally comes with a higher required return than comparable bank senior debt and can include original issue discounts, upfront fees, prepayment protection or other economics.
Preferred equity sits below creditors but ahead of common equity according to its negotiated rights.
Unlike conventional debt, it may reduce scheduled cash debt service because part of the investor return can sometimes accrue as payment-in-kind, or PIK, rather than being paid entirely in cash.
That does not make preferred equity inexpensive.
Its economics can include cash dividends, accumulating PIK dividends, liquidation preferences, redemption rights, participation rights, conversion features, board representation or consent rights over specified corporate actions.
For companies evaluating the three sources, the question is therefore not simply, “Which rate is lowest?”
It is, “What combination gives the company enough liquidity while preserving acceptable coverage, ownership flexibility and a realistic refinancing path?”
The appropriate senior debt amount should be driven by sustainable repayment capacity under a downside case, not by the maximum amount a lender is willing to quote.
Credit committees may examine adjusted EBITDA, but EBITDA alone does not repay debt. The analysis normally has to bridge from earnings to actual cash available after working-capital requirements, taxes, maintenance capital expenditures and other fixed obligations.
Senior lenders will also consider collateral, industry cyclicality, customer concentration, acquisition history, existing debt, recurring versus project-based revenue and the quality of financial reporting.
A company with $60 million of EBITDA can have substantially less debt capacity than another $60 million EBITDA company if it needs significant annual capital expenditures, experiences volatile working-capital swings or relies heavily on one customer.
This is why maximizing leverage at closing can produce a structurally weak recapitalization even when the transaction initially clears underwriting.
Private credit can become useful when flexibility has more value than achieving the lowest possible headline borrowing cost.
For example, a private lender may evaluate a business that needs a customized acquisition facility, delayed draws, a unitranche structure or documentation that accommodates a defined growth strategy.
The trade-off is economic.
The company should compare more than the stated coupon. Relevant terms can include:
upfront fees, original issue discount, benchmark floors, amortization, excess-cash-flow sweeps, prepayment premiums, call protection, amendment fees, financial covenants and the definition of EBITDA itself.
A 10% facility with material fees and several years of call protection can have a very different economic cost from another facility quoting the same stated interest rate.
Private credit is also not automatically junior to a bank. A private fund may provide the entire first-lien facility. Where different first-lien and junior creditors coexist, lien priority and enforcement rights typically become part of an intercreditor agreement.
Preferred equity can be useful when adding another dollar of debt would produce too much mandatory cash service or create excessive refinancing risk.
Consider a company that could technically support another $40 million of debt, but doing so would leave very little cash-flow cushion if revenue declined.
Using preferred equity instead could reduce scheduled debt amortization and interest obligations. The trade-off is that the preferred investor typically requires a higher economic return and negotiated rights protecting its investment.
Management should model the full preferred-equity economics, including:
cash dividends, PIK accrual, compounding, redemption value, liquidation preference, conversion rights, participation, investor consent rights and any required exit timetable.
Preferred equity is still equity capital for securities-law purposes. The SEC states that securities generally must be registered or offered pursuant to an exemption. Private placements under Rule 506 are among the exempt pathways available, subject to their specific requirements. Securities counsel should structure the issuance and determine the applicable exemption.
The larger the capital request, the more important institutional-quality financial reporting becomes.
A serious underwriting package will commonly address historical results, current performance and the company's ability to perform under a downside scenario.
Expect diligence around audited or otherwise appropriate year-end financial statements, current interim statements, detailed debt schedules, liquidity, accounts receivable and payable, customer concentration, backlog or contracted revenue where relevant, capital expenditures, cash taxes, working-capital requirements and management's forecast assumptions.
Lenders may also request organizational charts, ownership information, material contracts, litigation or regulatory disclosures, insurance information, collateral schedules, appraisals and a detailed sources-and-uses schedule.
The same principle appears even in smaller asset-backed transactions: the amount and complexity of diligence generally rise with exposure. Mehmi's U.S. cold-storage financing documentation guide explains why financial reporting and equipment detail become increasingly important as transaction size grows.
A company should ideally prepare a lender-ready model before going to market rather than allowing every financing source to reconstruct the company's cash flow differently.
Lien diligence can determine whether the proposed capital stack is legally possible.
Uniform Commercial Code Article 9 provides the general U.S. framework for secured transactions involving personal property. The Uniform Law Commission notes that states maintain filing systems through which security interests can be publicly disclosed.
Existing blanket liens can therefore affect new senior debt, asset-based financing and equipment financing.
Before closing, counsel and financing parties may need to determine which creditor holds security interests in receivables, inventory, machinery, deposit accounts or other collateral, and whether existing liens will be repaid, terminated, subordinated or remain in place.
The general Article 9 rule is that filing a financing statement is required to perfect many security interests, although important exceptions apply and certain collateral can require different perfection methods.
For a practical asset-level example, see Mehmi's guide to UCC and lien checks before equipment funding.
Sometimes.
A company should determine whether every capital expenditure really needs to sit inside the corporate term-loan structure.
Separately financing long-lived, identifiable equipment can potentially preserve corporate liquidity and match the financing term more closely to the asset generating the cash flow.
The analysis depends on equipment ownership, remaining useful life, condition, resale value, existing liens and whether the corporate credit agreement permits additional secured debt.
Mehmi's U.S. guides to equipment financing in Dallas–Fort Worth, Houston and Phoenix explain how loans, leases and refinancing can be matched to productive commercial assets.
The same asset-level credit principles apply in other markets covered in Mehmi's guides for North Carolina businesses, Memphis businesses and Oshkosh businesses.
These are asset-level financing examples rather than substitutes for institutional recapitalization advice, but the underlying principle matters at every transaction size: long-lived assets should not automatically consume unrestricted corporate liquidity when a suitable asset-backed structure exists.
Tax deductibility should be modeled before the final debt amount is selected.
Under current IRS guidance, when Internal Revenue Code Section 163(j) applies, deductible business interest expense is generally limited to the sum of business interest income, 30% of adjusted taxable income, and floor-plan financing interest expense. Certain businesses and taxpayers are excepted.
For 2026, the inflation-adjusted gross-receipts threshold used for the small-business exception is $32 million, subject to the IRS rules governing that test.
A $100 million recapitalization should therefore be modeled with the company's tax advisers rather than assuming every dollar of interest expense will create a current tax deduction.
Preferred-equity dividends and other investor economics can receive different tax treatment from interest expense, making tax structure part of the debt-versus-equity decision.
Assume an established U.S. company needs $180 million of new capital to refinance debt, provide shareholder liquidity and retain additional growth capital.
This example is for illustration only. It is not a Mehmi Financial Group offer, lender quote or indication of available market pricing.
The hypothetical structure is:
For simplicity, senior principal amortization occurs at each year-end. Interest and cash preferred dividends may be paid quarterly even though the calculations below aggregate them annually.
The senior term loan generates approximately $31.97 million of interest over five years under those assumptions. After $4.5 million of cumulative scheduled amortization, approximately $85.5 million remains due at maturity. Including the $900,000 assumed upfront fee, total senior cash outflow over the five years is approximately $122.87 million, including repayment of principal.
The $50 million private-credit facility generates $5.75 million of cash interest annually, or $28.75 million over five years. Including repayment of the $50 million principal and the assumed $1 million upfront fee, total cash outflow is $79.75 million.
The preferred equity produces $3.2 million of annual cash dividends, or $16 million over five years. The 4% PIK component compounds the $40 million preference to approximately $48.67 million by year five. If the company redeems it then, total preferred-equity cash outflow over the period would be approximately $64.67 million, including cash dividends and redemption.
Total first-year recurring cash capital service is approximately $16.38 million before taxes and other corporate obligations.
If the company had $30 million of cash available for capital service under its base case, that would leave approximately $13.63 million before other discretionary uses. Management would still need to stress-test what happens if cash generation falls materially below plan.
The bigger issue is year five.
Approximately $184.17 million of senior principal, private-credit principal and accumulated preferred preference would need to be refinanced, redeemed or otherwise addressed at maturity.
Including the final year's recurring capital service, year-five cash requirements would approach $200.28 million if the business attempted to satisfy everything with cash.
That is why a recapitalization should be structured around the exit and refinancing plan, not simply around whether the company can make next year's interest payments.
The example excludes legal fees, advisory fees, hedging costs, appraisal expenses, syndication or agency charges, additional original issue discounts, taxes and other transaction expenses.
For a $100M+ transaction, documentation can be as economically important as pricing.
Senior and private-credit borrowers should examine amortization, maturity, leverage covenants, fixed-charge or interest-coverage tests, excess-cash-flow sweeps, mandatory prepayments, permitted acquisitions, restricted-payment baskets, additional-debt capacity, EBITDA add-backs, collateral-release provisions and change-of-control language.
A company planning acquisitions should pay particular attention to acquisition baskets and incremental-debt provisions. A company planning shareholder distributions should understand restricted-payment capacity before closing.
For preferred equity, focus on liquidation preference, whether dividends are cash or PIK, whether PIK compounds, redemption provisions, investor consent rights, conversion features and participation in future equity value.
The lowest coupon can become the more restrictive or expensive capital source once these provisions are considered together.
Borrowing less can be the better decision when the recapitalization leaves little room for normal operating volatility.
Warning signs include a structure that depends on aggressive EBITDA adjustments, a major maturity wall without a credible refinance path, distributions that remove most available liquidity, or debt service that only works if management's upside forecast is achieved.
Alternatives can include raising more common or preferred equity, selling a non-core asset, delaying a shareholder distribution, reducing the acquisition size, refinancing specific equipment separately or completing the transaction in stages.
Companies with meaningful hard assets can also evaluate equipment financing structures in North America rather than automatically placing every financing need inside the corporate recapitalization.
Start with the capital structure, not the lender list.
Define exactly how much money is required, how the proceeds will be used, how much scheduled cash service the business can safely carry and what the expected repayment or refinancing event will be.
Then prepare one consistent financial package with a defensible adjusted EBITDA bridge, cash-flow forecast, downside case, debt schedule, collateral overview and sources-and-uses statement.
The objective is to compare financing proposals on the same basis.
A proposal should be evaluated on total economics, annual cash requirements, maturity exposure, collateral, covenant flexibility, call protection, dilution and governance rights rather than headline pricing alone.
Potentially, but a single-source structure is not always preferable. Depending on credit quality and transaction design, financing may come from one private-credit provider, a bank group, a club of lenders or separate senior, junior and equity providers. The appropriate structure depends on cash flow, collateral, leverage and transaction objectives.
Not in every transaction, but private credit commonly requires a higher return when it provides additional leverage, structural flexibility or takes risks a conventional senior lender will not. Compare total cost, including fees, call protection and documentation, rather than coupon alone.
Generally, preferred equity is an ownership security rather than conventional debt, although its contractual economics can resemble debt in some respects. Terms such as mandatory redemption, cumulative dividends and liquidation preferences can create substantial fixed economic obligations, so legal, accounting and tax advisers should review the structure.
Yes. Shareholder liquidity is one possible use of recapitalization proceeds. The company still needs enough post-transaction liquidity and repayment capacity; maximizing the distribution at closing can weaken an otherwise sound financing structure.
Potentially. Separate equipment financing can make sense where identifiable assets have sufficient value and useful life, but existing credit documents, collateral arrangements and intercreditor issues need to permit it.
Common problems include insufficient sustainable cash flow, excessive leverage, customer concentration, aggressive earnings adjustments, incomplete financial reporting, unresolved liens, unrealistic forecasts, unclear use of proceeds and no credible plan for the maturity or investor exit.
Mehmi Financial Group operates as a financing brokerage/intermediary rather than controlling a lender's underwriting or guaranteeing approval. For an institutional-scale request, the first step is determining whether the transaction fits the current financing network and what lender, investor or specialist placement path is appropriate.
If your company is evaluating a large recapitalization, the starting point should be the complete capital requirement rather than a request for a single rate.
When contacting Mehmi Financial Group, provide the financing amount, confirm that the business is in the United States, the state of operation, intended use of funds and target closing timing. For a $100M+ transaction, also include the existing debt structure and recent financial performance if available.
Mehmi Financial Group can review the financing objective as a brokerage/intermediary and determine whether it fits its current network or requires a different institutional financing path. Financing remains subject to the applicable lenders' or investors' underwriting, documentation and approval.
Call 833-863-4644 or contact Mehmi Financial Group.
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