Private Placement

a practical alternative for raising capital


A private placement, also known as a “private placement debt offering,” is the private sale, or “issue” of corporate debt or equity securities by a company, or “issuer,” to a select number of investors. It is another avenue for businesses to raise capital, versus selling a publicly offered security or establishing a traditional bank credit arrangement.

There are three key features that would classify a securities issue as a private placement:

1. The securities are not publicly offered

2. The securities are not required to be registered with the Securities and Exchange Commission (SEC)

3. The investors are limited in number and are “accredited”1

Traditionally, middle-market companies have issued debt in the private placement market either directly with a private placement investor, such as a large insurance company or other institutional investor, or through an agent (most often an investment bank) on a best efforts basis, who then solicits bids from several potential investors. Agented investments are typically done for larger transactions ($100MM+). It is possible for there to be as few as one investor for any issue. 

A private placement issuance is a way for institutional investors to lend to companies in a similar fashion as banks, with a “buy-and-hold” approach, and with no required trading or public disclosures. Historically, banks refer to investments as making “loans,” whereas insurance companies purchase “notes.”

Types of Private Placements

There are many types of private placements but the most common is long-term, fixed-rate senior debt. Like bonds or bank loans, private placement debt securities can either be secured, meaning they are backed by collateral, or unsecured, where collateral is not required.

In addition to senior debt, other types of private placement debt issuances include subordinated debt, asset backed loans, leases and shelf issues.

These are the more common types of private placements:

Types of Private Placements

Uses for Capital Raised from Private Placements

Given that private placements are typically long term, the capital raised from issuing a private placement is commonly used to support long-term initiatives versus short-term needs, such as working capital. Both private and public companies can use the capital raised through a private placement relationship in the following ways:

Benefits of Issuing a Private Placement

Public and private companies issue in the private placement market for a variety of reasons, including a desire to access long-term, fixed-rate capital, diversify financing sources, add additional financing capacity beyond existing investors (banks, private equity, etc.) or in the case of privately held businesses, to maintain confidentiality.

Private placements provide these four key benefits:


Long Term

Private placements offer longer maturities at a fixed-interest rate. This is ideal for when a business is presented with a growth opportunity where they wouldn’t see the return on their investment right away; the business would have more time to pay back the private placement, while having certainty of financing cost over the life of that investment.

Also, private placements are typically "buy-and-hold," so the company would benefit from having a long-term relationship with the same investor throughout the life of the financing.


Speed in Execution

The growth and maturity of the private placement market has led to improved standardization of documentation, visibility of pricing and terms, increased capacity for financings as well as overall increase of size and depth of the market ($10M-$1B+). Thus, the private placement market fosters an environment that allows for quick execution of an investment, generally within 6-8 weeks (for the first transaction – follow-on financings can be executed within a shorter time frame). 

3.  Complement to Existing Financing

Private placements also help diversify a company’s sources of capital and capital structure. The terms for private placements are customizable as well, therefore they can complement existing bank debt versus compete with it, and can enable companies to better manage their debt obligations. Diversification of funding sources is particularly important during market cycles when bank liquidity may be tight.

Additionally, private placements allow privately-held, middle-market companies as well as public companies to access capital just as they would with an underwritten public debt offering, but without certain requirements, such as ratings, registrations or minimum size.


Privacy and Control

Private placement transactions are negotiated confidentially. Public disclosure requirements are limited as well, compared to those found in the public market. Because of this, companies would not be beholden to public shareholders.

Alternatives to Private Placements

When a business is first started, it would typically be funded by the owners or a family loan. However, as companies grow, they will have more types of capital available to them, including many of the following:

Types of Capital Available to Businesses

When funding capital needs that exceed internally generated cash flow, it is common for middle-market companies to rely exclusively on traditional bank debt financing. However, a traditional bank loan may not be the best financing solution for the need at hand. For example:

  • Bank loan commitments tend to be shorter term (typically 3-5 years), whereas private placements offer longer maturities (typically 3-12+ years). Thus, a private placement is generally better-suited for financing the long-term goals of a business
  • While banks rely on ancillary services and fee generation to enhance investment return, private placement lenders rely solely on the yield they receive from their loans. As a result, the private placement provider’s interest in lending is not dependent upon “expectations” for future fee income, enabling issuer and lender interests to be better aligned over the life of the lending relationship
  • The private placement market and the insurance companies as well as pension plans that participate in the market are not subject to governance by the Office of the Comptroller of the Currency (OCC) and the regulations that impact bank lending practices
  • The capital that private placement lenders have available to deploy is traditionally more stable than that which the bank market relies upon; insurance companies and pension plans are not materially exposed to short-term liquidity risk like banks are

The other primary alternative to private placements is for public companies to source capital from the public debt markets, which also have certain disadvantages to private placements, including:

  • The public markets are often seen as less stable than the private placement market, and are “closed for business” at times when the private market is “open”
  • Unlike the public market, private placement transactions are negotiated confidentially
  • It is typically faster to issue a private placement versus a corporate bond in the public market since the issuer is not required to expend time and resources creating a prospectus and registering with the SEC
  • Private placements can offer superior execution relative to the public bond market for small issuance sizes as well as greater structural flexibility

Adding patient, private placement financing to a company’s capital structure allows them more time to realize a return on their investment as well as minimizes the refinancing risk that comes with shorter-term financing. It can also be sourced more quickly than capital from the public markets and diversifies a company’s capital base, better preparing them for any changes to interest rates and other issues that could arise with taking on only one type of debt. Additionally, private placement financing enables companies that value their privacy to remain private.

Partnering with Prudential Capital Group

At Prudential Capital Group, we understand how important it is to find a private placement investor who can offer financing that aligns the goals of your business. With more than 75 years of history in structuring and investing in the private market, we have the knowledge and experience to implement a customized private placement to best meet your liquidity objectives. 

Century Gaming Quote

Benefits of partnering with Prudential Capital Group include:

  • Capacity to fund across the capital structure; a one-stop shop with senior debt, mezzanine or subordinated debt and preferred equity
  • Supportive, patient, relationship-oriented partner
  • Deep pockets to provide follow-on capital to fund future growth
  • Streamlined due diligence and execution process, ensuring speed and certainty of close
  • Industry agnostic, with deep experience financing manufacturing, service and distribution businesses

 View a private placement example.

Structural Characteristics of a Private Placement Purchased by Prudential Capital Group

  • Senior debt and/or subordinated debt
  • Principal repaid after senior debt has been fully amortized
  • Combination of cash coupon and deferred interest
  • Ability to provide senior debt alongside junior capital for a seamless, one-stop solution with a single, relationship-oriented capital partner
  • Typical size: $10 million to $300 million
  • Typical maturities: three to 25+ years
  • Flexible payment structures including amortizing or bullet, and fixed or floating rate

Investment Focus

  • Middle-market companies with attractive growth prospects and positive cash flow
  • Company revenue minimum of $50 million
  • Management teams and active ownership with an economic stake in the company’s success
  • Ability to provide senior debt investments between $10 million and $300 million in size
  • Ability to provide subordinated debt investments between $10 million and $100 million in size


Interested? We would be happy to discuss how a private placement could work for you.



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1An investor is considered “accredited” if they meet minimum financial net worth qualifications as well as other requirements set by the federal government; They are considered to be more experienced and are the only investors allowed to purchase private placements. Being accredited should imply that the investor has the knowledge required to make prudent investment decisions but also that they can afford to take a loss should something go wrong.