Bridge financing is a method of financing, used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. Finance addresses the ways in which individuals, business entities and other organizations allocate and use monetary resources over time. ... In financial markets, an initial public offering (IPO) is the first sale of a companys common shares to public investors. ...
These funds are usually supplied by the investment bankunderwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stock at a discount of the issue price to the underwriters that equally offsets the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue. Investment banks assist public and private corporations in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers, acquisitions and other types of financial transactions. ... // Securities underwriting Securities underwriting is a way of placing a newly issued security, such as stocks or bonds, with investors. ... See stock (disambiguation) for other meanings of the term stock In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. ... In finance, discounting is the process of finding the current value of an amount of cash at some future date, and along with compounding cash form the basis of time value of money calculations. ...
Bridge financing was featured in the 2000 film Boiler Room. Boiler Room DVD cover Boiler Room is a 2000 U.S. drama / thriller film, written and directed by Ben Younger, and starring Giovanni Ribisi, Vin Diesel and Nia Long. ...
Bridgefinancing has become a popular source of revenue for investment bankers" but they need to keep two things in mind: the risk this form of financing poses for both company and bank, and possible conflicts of interest.
Bridge loan agreements typically contain standard loan covenants, such as requirements to maintain minimum levels of net worth and prohibitions against additional borrowings (including modifying the terms of the senior bank loan), significant asset disposals, securities repurchases, and dividend payments.
Bridgefinancing reduces the time period needed to complete an acquisition because the offer does not have to be conditioned upon the availability of permanent financing or delayed while that financing is arranged.
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