Equity financing is established partnerships by teaming up in joint ventures or strategic alliances with prospective investors, limited liability companies, sole proprietorship and County Governments. The Equity Investment strategy entails forming a joint ownership structure with respective investors where the Corporation would provide funds and or land with the Corporation Investing up to a maximum of 25% of the total project cost. However, once equity investment matures, the Corporation strategy entails divestiture to re-invest the proceeds in a new joint venture projects.
Tourism Finance Corporation invests equity in private sector companies in the tourism sector in order to facilitate or enhance the participation of private capital, as well as to encourage the mobilization of additional capital from external sources.
The general Terms and conditions of the Tourism Finance Corporation investing Equity include:
- Minority position of the entity’s share capital
- Average time for maintaining an equity investment: 10 years
- Rate of return reflecting the risk profile of the investment
- Clearly defined exit strategy
The Corporations equity investments can take any of the following forms:
- Direct Equity Participation: This involves the Corporation injecting funds into a new project in the form of capital contribution or land.
- Joint Venture (JV): A business arrangement in which TFC partners with a private investor, pooling resources for the purpose of accomplishing a specific project. This can be a new project or an existing business.
- Quasi Equity: This is a category of debt taken on by the Corporation that has some traits of equity, such as having flexible repayment options or being unsecured. This is primarily advanced to existing businesses including those in which TFC has a shareholding. Examples of quasi-equity include mezzanine debt and subordinated debt.
The Corporations equity participation will be in the form of ordinary shares