Debt vs Equity: Evergrande and China's Three Red Lines (the Investor's Perspective)

[@SteveBalaban]

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[@matteo.gerardo]

Great Video! Shared with everyone I know, Love the content

[@SteveBalaban]

Matteo, Thanks so much for your comments and for sharing the video. I really appreciate it!

[@0f897]

Awesome 😎 content 👏

[@SteveBalaban]

Thank you!

[@LasVegasImp]

Useful.

[@SteveBalaban]

Thank you for your comment, Howard!

[@jemmytechnodesignopticalho5104]

Nice video for learning. Thanks, Steve; keep it up. . Please try to make a video about CONSEQUENCE/DEFAULT ON OF PE EXIT ,I wish you All the best

[@SteveBalaban]

Hi Jemmy, thanks for your message. Can you please clarify your question? Do you mean if a company defaults while owned by a PE firm before exit? Or something else?

[@jemmytechnodesignopticalho5104]

@@SteveBalaban Yes, Exactly. If the founder has an Exit default, what would be the consequence?

[@SteveBalaban]

Thanks Jemmy. If a company defaults, the lender will take over the company. Before that happens, the business can try to sell assets to generate cash (to avoid defaulting on the loan) or try to raise additional funds. If the company is PE-owned, there is a decent chance that the PE firm will put more money in the business (if the PE firm believes the business will be successful), but that would be on a case-by-case basis. Does that answer your question?

[@jemmytechnodesignopticalho5104]

@@SteveBalaban Hi Steve, Yes, partially correct, my question, Example, I owned a company 70% and PE 30%, in that case, if PE could not exist in 5 years according to TERM SHEET, then what would be the consequence? Are they could fire me from the "Chairman & CEO " post? What would be my 70% share? I am not asking for any debt matter. Thanks

[@SteveBalaban]

Thanks for your question, Jemmy. When you are negotiating the agreement with the PE firm, you should set this out clearly at the beginning. For example you would want to: - state clearly who has authority to make certain decisions. Is it you, the PE firm, a Board? If the Board has the authority to fire you, you'd want to figure out who's on the Board, the process that the Board would need to take to fire you (and make other decisions) and how the people on the Board will change over the years. If you want to ensure you can't be fired, this will be part of the upfront negotiation. - state clearly that what happens in the event the PE firm no longer exists (are there restrictions on who the PE firm can sell its stake to?) Jemmy, these types of things are negotiable and should be clearly discussed upfront. I know you have a successful business that you have built over many years. To ensure you are protecting it in the future, I'd recommend that you ask the hard questions to potential investors and make the investors answer those questions. If you don't discuss potential issues upfront, they can be a big problem down the road. I hope that helps!

[@ellenoir5678]

🤓

[@SteveBalaban]

Thanks for your message, El Lenoir!