Chapter 8 - Capital Structure & Credit

G2G Chapter 8 - Capital Structure & Credit

Other People's Money

Understanding Financing, Capital Structure & the Cost of Capital CHAPTER 8 OF 13 London, SBCI Tower - Haircut's Office Haircut leans back, eyes fixed on a cap table spreadsheet. Subtrax Ltd's shareholder list is short and lopsided. Magda holds ~73% equity - enough for absolute control. The rest belongs to a scattering of early backers, notably a Romanian LLP that now finds itself on the outside looking in. Haircut notes how that LLP's stake has been diluted over successive funding rounds. No board seat, no veto rights; effectively frozen out. He drums his fingers, considering the opening this presents. A marginalized investor might welcome an exit - perhaps even support a takeover. His phone buzzes with a calendar reminder: a flight to London in 12 hours. He's booked it quietly, not even telling his team. If the clouds burst, he wants to be on the ground. His phone glows with a reminder: a flight to London in 12 hours. He's booked it quietly. If the clouds burst, he wants to be on the ground. Frankfurt, SBCI Tower - Trace's Office (Night) Across the Thames in Frankfurt, Trace closes yet another Excel file that no one asked her to create: "Revolver Sizing - Königshof." She rubs her eyes. It's past midnight on an otherwise empty floor.

By day, she answers Haircut's query about Königshof's WACC (Weighted Average Cost of Capital). By night, she went further - drafting an internal memo on how large a revolving credit facility Königshof Maschinen might need post-buyout. She calculates seasonal working capital swings, shock-absorbers for bad years, buffer for delayed subsidies. The result: a €41.5m revolving line, enough to cover a 600-day cash cycle (inventory sitting ~600 days, receivables ~90, payables ~45). No one requested this analysis. Trace anticipates the unasked questions. A highly leveraged Königshof will need liquidity support; others might harvest harvest season cash paper profits. She prints the memo, unsigned, and slips it onto the VP's desk before leaving. Frankfurt, Ballroom - A Mezzanine Debt Panel (Morning) Wilhelm Königshof adjusts an ill-fitting conference lanyard around his neck. The ballroom is buzzing with financiers gathered for a panel titled "Mezzanine Debt: Myths & Reality." Wilhelm feels utterly out of place. At Haircut's gentle urging, he agreed to attend. "Just listen, no commitments," the banker had said. Now he sits quietly in the front row, flanked by polished investors half his age.