Definition Of Quasi Equity

A category of debt taken on by a company that has some traits of equity such as having flexible repayment options or being unsecured.

Definition of quasi equity. Quasi equity investments can be structured as debt unsecured. Means a type of financing that ranks between equity and debt having a higher risk than senior debt and a lower risk than common equity and whose return for the holder is predominantly based on the profits or losses of the underlying target undertaking and which are unsecured in the event of default. Characteristics of quasi equity financing would include either being an unsecured loan or being a flexible loan repayment schedule. The discount rate that reflects only the business risks of a project and abstracts from the effects of financing.

Quasi equity financing is debt that appears in some aspects as an equity investment. Funds other than paid up capital and retained earnings employed in a business and which will remain in a business as permanent capital. Quasi equity evolved out of the need for more bespoke layering within transaction structures. Examples of quasi equity include mezzanine debt and subordinated debt.