We are continuing to see Guernsey and Jersey structures being established for investment into and acquisition of infrastructure assets such as windfarms, network utilities and renewable power.
Why we are seeing this
One of the reasons for this ongoing trend is that both Guernsey and
Jersey offer flexibility that other jurisdictions may not,
including capital maintenance advantages, the ability to have
corporate UK tax residence and tax neutrality on interest,
dividends and distributions.
Jersey and Guernsey are also well-known sophisticated international
financial centres, offering settled corporate and finance regimes
with a wealth of service providers across the legal, corporate
administration and listing industries.
The structure
A typical structure for an investment or acquisition
"stack" usually includes the following Guernsey or Jersey
entities:
As you will see from above, the stack usually includes:
- A Bidco which will usually be (i) funded on a
leveraged basis, (ii) the borrower of senior debt to finance the
acquisition and (iii) wholly owned by another Jersey/ Guernsey
company, Midco;
- A Midco which will usually be (i) funded on a
subordinated mezzanine basis, (ii) the borrower of mezzanine debt
and (iii) wholly owned by another Jersey/ Guernsey company, Topco;
and
- A Topco which will usually be (i) funded through equity subscribed for by the investor(s) and (ii) more widely held than Bidco and Midco.
This structure will be familiar to many in the UK, including tax
advisors. There are, of course, variations here and there to suit
transaction specific needs, often comprising a broader range of
vehicles in the middle of the stack.
How we can help
In these transactions input and advice is required from specialist
corporate, regulatory, tax and banking and finance professionals to
ensure that the entities are properly incorporated, the stack is
properly established in compliance with local regulations and that
the funding arrangements are properly put in place.
Our Channel Islands Banking & Finance, Investment Funds &
Corporate and Regulatory & Risk teams collaborate to work
closely with the client, their lawyers and tax advisors in these
transactions and we are well placed to assist and provide full
coverage on these deals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
