Cross-Asset Private Capital Solutions Reshape Corporate Finance Landscape

What's New

KKR's "Reinventing Corporate Capital" report reveals a significant shift in corporate financing, with structured cross-asset solutions increasingly replacing traditional debt and equity options. According to KKR Credit & Markets analysis, Capital Solutions represent an emerging category designed to bridge fragmented debt and equity markets with flexible, tailored financing structures.

Why It Matters

This evolution comes at a critical time when muted IPO markets, extended private equity holding periods, and historically low distributions-to-paid-in-capital (DPI) ratios are forcing businesses and sponsors to seek alternatives beyond conventional financing methods. Capital Solutions provide strategic funding that aligns with growth objectives without forcing control changes.

Big Picture Drivers

• Transition from zero interest rate policy has made debt financing more expensive, increasing demand for flexibility including non-contractual returns.

• Extension of private market cycles, with companies staying private longer (median PE-backed firm hold period reached 7.1 years in 2023).

• Liquidity challenges highlighted by limited sponsor-backed exits and historically low DPI ratios driving need for alternative financing structures.

• Flexibility requirements from CFOs seeking to avoid dilution from equity issuance or excessive leverage from incremental debt.

• Partnership capital increasingly preferred by majority owners who want strategic alignment without ceding control.

By The Numbers

• Over 4,000 investment grade corporate issuers globally seeking strategic financing alternatives

• $20 trillion in global fixed income issuance over the last decade

• $60 trillion U.S. public company market capitalization (nearly half of global market value)

• 25%-50% typical LTV (loan-to-value) attachment profiles in KKR Capital Solutions strategy

• 7.1 years all-time high median hold period for private equity-backed firms in 2023

Key Trends to Watch

• Growing TAM will continue to expand as demand for capital outpaces supply, driven by transition of public issuers to private markets and sponsor-backed companies seeking liquidity.

• Structured equity products like convertible debt/equity and preferred equity are gaining traction, offering unique value propositions to both businesses and investors.

• Extended private market cycles are creating new opportunities as the scarcity of IPOs and persistent valuation gaps reshape exit strategies.

• Cross-asset financing solutions including preferred equity, structured equity, and HoldCo financings will continue developing as businesses seek to minimize cash-pay debt service.

The Wrap

Capital Solutions represent not just a temporary shift but a fundamental evolution in corporate finance. By blending elements of both debt and equity, these bespoke structures offer downside protection with equity upside potential, creating value for businesses navigating complex financial landscapes while providing investors with diversified risk-adjusted returns.