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.
[View source.]
