Capital Solutions
Structures to optimize capital
Innovative structures designed to improve the capital balance sheets of listed companies
Carbonia has the expertise and experience to structure bespoke transactions designed to optimise the capital structures of listed companies, utilising innovative solutions that do not involve dilution for shareholders or new financing.
The approach to these options is always holistic and can be viewed from a regulatory perspective, with solutions for regulated entities—particularly credit institutions—to strengthen their regulatory capital requirements.
Carbonia develops these structures in collaboration with McKinsey & Co, a partner with recognised international standing.
Within the field of structuring, Carbonia actively participates in transactions involving deferred tax assets.
DTAs – Deferred Tax Assets
Carbonia has developed synthetic structures for the monetisation of tax assets that enable companies to generate cash against deferred tax assets (‘DTAs’). These structures offer clear advantages from the perspective of companies’ capital structure, by providing them with an opportunity to generate cash without incurring new financing or diluting shareholders.
Many companies have accumulated tax losses and deductions due to unused tax credits (collectively referred to as net operating losses or ‘NOL’) and can monetise the value of these NOLs and other DTAs through a synthetic tax credit transfer agreement.
Tax credit agreements allow companies and financial institutions to:
- Access a source of liquidity with contingent payments linked solely to the company’s profitability, which never exceed the tax benefit the company would otherwise have realised; and
- Monetise an asset that is not typically valued in public markets with a non-dilutive source of capital.
Cascades can be structured in different ways and against different types of DTAs, depending on the company’s preferences and the available DTAs.
These transactions may include:
- Conversion of DTAs into claims against the tax authorities, where permitted by law (for example, in Spain under Article 130 of the Corporation Tax Act). In certain circumstances (such as accounting losses, liquidation or insolvency), the company may request that these DTAs be converted into a direct claim or offset against other tax liabilities.
- Valuation and trading of DTAs within corporate transactions, mergers or restructurings, where these assets can significantly influence the economic value of the company.
- Analysis of the quality of regulatory capital, particularly in banks, where DTAs may be subject to specific treatment in terms of solvency and loss absorption.