Services > Consulting > Transactions > M&A Tax > Debt Financing

Debt Financing

Transactions that involve debt can require significant understanding of tax consequences to reach a favorable outcome for both buyers and sellers. Lack of focus on key tax areas can bring major risks and unwanted surprises such as unexpected tax liabilities, reduced cash flow, and reduced profitability.

Proactively addressing debt financing—a common means of raising capital by selling debt instruments—can help you properly evaluate and execute major transactions, like M&A, business expansions, or general operating needs.

Navigate the debt financing landscape successfully and create a debt financing strategy with guidance from our professionals, so you can stay focused on executing your business and transaction goals. 

How We Support Your Transaction Strategy

Achieve your business objectives with tailored debt financing tax strategies that support your capital and debt instrument needs—whether you’re a lender or borrower negotiating challenging market conditions, preparing for a major transaction, managing after-tax capital costs, or addressing financial or operational threats.

Our solutions can help with:

  • Tax-Efficient Debt Structuring. Reduce tax implications and drive efficiency through guided debt term evaluations and structural assessments to manage after-tax costs of capital, secure interest deductions, and prevent unnecessary income recognition.
  • Cash Flow Stability and Financial Planning. Limit tax obligations with planning specific to your situation that supports raising or reworking your capital financing strategy.
  • Growth-Focused Capital Restructuring. Enhance financial potential, protect company tax attributes, and manage tax efficiency with guidance through the complexities of raising capital—whether from domestic or foreign sources, traditional banking institutions, family wealth, small investors, or private equity. 
  • Strategic Debt Repositioning. Successfully navigate market shifts by proactively restructuring and realigning company debt and financial arrangements to address changing economic conditions and borrower creditworthiness.

Expansive Tax Support Across Transaction Positions

Lenders and borrowers of all sizes look to our professionals for support to navigate debt financing tax complexities.

Debt Issuers

Distressed debt issuers can receive support to:

  • Address tax implications of extending, or refinancing debt instruments
  • Address tax implications of forbearance agreements due to credit down grades, covenant defaults, and cash flow constraints
  • Address debt workout and bankruptcy transactions
  • Manage tax implications ahead of debt discharge through restructuring operations and company set up

Well-performing debt issuers can proactively:

  • Manage tax consequences for refinancing and debt instrument alterations
  • Protect federal and state tax deductions for interest on high-yielding debt obligations, investment interest, convertibles, exchangeables, and mezzanine financing
  • Manage interest rate and currency risks with derivatives and hedges

Get tax support when issuing and raising debt to:

  • Structure the location of debt within a company structure to obtain benefits of interest deductions at the state and federal level
  • Navigate the interest deduction limitations of hybrid debt or equity instruments and high-yielding obligations
  • Address foreign withholding taxes

Debt Holders

Intercompany and third-party lenders can receive support to:

  • Guide tax implications of restructuring and financing efforts
  • Enhance tax position and control over debt restructurings and recovery
  • Protect against acceleration of tax income due to actual or deemed taxable exchange of investments
  • Evaluate debt instruments for phantom income inclusion
  • Capture tax benefits associated with impaired or worthless loans

Equity Holders

We work with a range of equity holders including:

  • Family-owned businesses and offices
  • Private Equity
  • Investment funds
  • Publicly traded equity holders
  • Management

Guidance can help:

  • Enhance debt recovery
  • Navigate restructuring participation
  • Capture tax benefits associated with impaired or worthless investments

Debt Investors

We support a range of investors including:

  • Family offices
  • Individuals
  • Funds that invest in debt on a regular basis

Guidance can help support:

  • Fund set up
  • Tax modeling respecting the acquisition of debt portfolios
  • Understanding tax rules concerning non-traditional finance arrangements

Deep Debt Financing Experience

Deeply immersed in more than 30 industries, our professionals provide solutions specific to the nuances, challenges, and operations of the sector in which you work—while customizing plans to meet your unique needs.

We don’t simply provide templates or toolkits; we proactively determine appropriate solutions that help build foundations for long-term success. Our tax professionals use their knowledge of capital markets and financing instruments to identify and mitigate potential tax risks associated with debt financing, helping reduce the likelihood of unexpected tax liabilities or compliance issues, and enabling informed decisions.

Our one-firm approach allows your organization to tap into the full resources of our firm, integrating guidance and solutions related to other integral support areas including finance, audit and other transaction services.

Primary Contact

Chuck Thompson
Chuck Thompson
Partner
(469) 453-7178