capital stack
Every source of money in a purchase, ordered by who is repaid first and what each layer costs.
Senior debt sits at the bottom and is repaid first. Above it sit mezzanine, sponsor equity and whatever is left unfunded, and the gap at the top is the one that closes a deal or kills it a week before completion.
The stack is only sound if each layer's cost is charged against the deal rather than assumed away. Arrangement fees, exit fees, retained interest and the lender's own legal costs are all money the sponsor never sees, and a stack modelled on the face value of the facility overstates what arrives.
A gap the sponsor is expected to find is not funding. It is an assumption, and it fails at completion rather than at appraisal, which is the most expensive point at which to discover it.
Where this comes up
- Red Team stress testing: finding the fragile deal
Nine scenarios move the value, the works, the rate and the timeline — one at a time, then together. Only single-factor losses cap the score, because a deal…
- Net advance: what a bridging facility really releases
A facility is not a cash sum. Where interest is retained it is deducted at drawdown, so the net advance is smaller than the headline. A capital stack…
- Below market value is not the same as a discount
The headline discount ignores stamp duty, finance, works and selling costs. True discount counts every pound deployed, and it is almost always worse.
- When a deal pack becomes a financial promotion
Direct property purchase sits outside the perimeter. Package it, share it, or publish a return, and the same pack becomes something only an authorised person…