Let’s run a capital stack simulation through a company’s lifecycle, from startup to distress, using realistic transitions seen in Asian corporate behavior.

We’ll use simplified numbers but preserve structural accuracy and real-world patterns.

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Case Simulation: “F&B Asia Co.” (A Pan-Asian Consumer Food Brand)

Jurisdictions Involved:

Singapore HQ, China production, Indonesia & India distribution.

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Stage 1: Start-Up Phase (Year 1–2)

Capital Raised	Amount (USD mn)	Instrument
Founder Equity	$2	Common Shares
Angel / Seed Investors	$3	Convertible Notes (0% coupon, convert at Series A discount)

Capital Stack at End of Year 2:

Layer	Amount	Notes
Convertible Notes	$3	Debt form, but intended for equity conversion
Common Equity	$2	Founder shares

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Stage 2: Growth Phase (Year 3–5)

• Series A & B Equity Raises:
  Raised $20mn from VCs at Year 3; Series B $50mn at Year 5.
• Bank Debt Introduced:
  Secured $10mn working capital loan from DBS Singapore (secured against inventory).

Capital Stack at End of Year 5:

Layer	Amount	Notes
Secured Bank Loan	$10	Working capital facility
Convertible Notes	$3	Now converted into equity (Series A round)
Series A Equity	$20	Preferred equity with anti-dilution
Series B Equity	$50	Preferred equity, participating with 1x liquidation preference
Founder Equity	$2	Diluted ownership

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Stage 3: Maturity Phase (Year 6–8)

• Cash Flows Improve → Moves to Capital Markets
• Issues $100mn 5-year bonds at 5% coupon (Unsecured)
• Launches $50mn perpetual bonds to fund overseas expansion (treated as equity in accounts)

Capital Stack at End of Year 8:

Layer	Amount	Notes
Secured Bank Loan	$10	Same as before
Unsecured Bonds	$100	Publicly traded debt
Perpetual Bonds	$50	Quasi-equity, no maturity, coupon deferrable
Series A & B Preferred Equity	$70	Still on books
Common Equity (Founders, early investors)	$5	Diluted stake

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Stage 4: Early Decline Phase (Year 9–10)

Scenario:

• China food safety scandal hits sales.
• Cash flows weaken; bond yields widen from 5% to 12% in secondary market.
• Perpetual bond coupons are deferred to preserve cash.

Actions:

• Issues Mezzanine Debt $30mn (12% coupon + equity warrants) to bridge liquidity gap.
• No new equity raised to avoid down-round dilution.

Capital Stack at End of Year 10:

Layer	Amount	Notes
Secured Bank Loan	$10	Senior
Unsecured Bonds	$100	Maturing in 2 years
Mezzanine Debt	$30	Subordinated, with warrants (5% potential equity dilution)
Perpetual Bonds	$50	Coupons deferred, market discounting to 60 cents on dollar
Preferred Equity	$70	Still on books
Common Equity	$5	Almost wiped out in market perception

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Stage 5: Decline Phase (Year 11–12)

Scenario:

• Bonds downgraded to junk (CCC).
• Banks refuse to roll over working capital lines.
• Customers shift to competitors; EBITDA declines by 40%.

Actions:

• Initiates debt restructuring talks.
• Offers to exchange unsecured bonds for new CoCo bonds (contingent convertibles with write-down triggers).
• Prepares for equity recapitalization via private placement to a PE fund.

Capital Stack at End of Year 12 (Post-Restructuring Proposal):

Layer	Amount	Notes
Secured Bank Loan	$10	Remains senior
New CoCo Bonds	$80	Replaced $100mn bonds; now convert to equity if coverage ratio <1.5x
Mezzanine Debt	$30	Still outstanding, warrants likely in the money
Perpetual Bonds	$50	Still deferred, trading at 30% face value
Preferred Equity	$70	Out-of-the-money due to debt overhang
New Equity Injection	$20	PE-led rescue financing
Common Equity	$5 → Diluted to <$1mn equivalent

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Stage 6: Distressed / Restructured Phase (Year 13–14)

Outcome:

• Debt converted into equity; prior equity almost wiped out.
• New capital structure dominated by former creditors.

Layer	Amount	Notes
Secured Debt	$10	Only unchanged part
Perpetual Bonds	$20	Reduced via haircut
New Equity	$80	Former bondholders now majority owners
Residual Common Equity	<$1	Founder stake almost zero

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Key Takeaways

Phase	Capital Strategy	Real-World Analogs
Startup	Founder equity + convertibles	Grab, Carousell early funding rounds
Growth	VC preferred + bank debt	GoJek, Zomato pre-IPO
Maturity	Bonds + perps to optimize WACC	TSMC, Reliance Industries
Early Decline	Mezzanine + hybrid deferrals	Lippo Karawaci
Decline	CoCo restructuring + PE rescue	Noble Group, Huarong
Distress	Debt-for-equity swaps	Hin Leong, Greensill parallels

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