Warrant
Private Credit glossary · Loan Structures & Instruments
Definition
Long-dated option to purchase equity, typically attached to debt instruments.
Warrant in plain English
A warrant is a coupon that lets you BUY a company's stock later at a price locked in today, and 'long-dated' just means you have years to use it rather than months. Lenders often ask for warrants as a sweetener when they make a risky loan: they still get paid back with interest, but the warrant gives them a shot at extra upside if the company thrives and its shares soar. Imagine lending a friend money for their food truck and also getting a paper that says 'I can buy 5% of the truck at today's value anytime in the next 8 years' — if it becomes a hit, that little paper is suddenly worth a lot.
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Practice Warrant
What is the recovery waterfall rank of a 'Warrant' or 'Equity Kicker' attached to a Mezzanine loan?
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