Equity Linked Securities (ELS) are short term promissory notes or debt obligations which are structured in conjunction with an Equity Line Facility (ELF).The issuer receives a lump sum of cash either at closing or upon declaration of an effective ELF registration with local stock exchanges or market regulators. In exchange for cash, the investor receives a short-term note usually with a term of 90-180 days. The issuer repays the ELS through a schedule of monthly installments with cash generated from operations, proceeds drawn from the ELF or from other means.

ELSs are an attractive structure for issuers which require an immediate injection of cash where timing is critical for needs such as an acquisition, seasonality of business etc. Even after the ELS has been issued and the cash proceeds utilized, the issuer has the added benefit of an effective ELF to continue to fund its capital needs. Certain criteria are reviewed to determine an issuer’s qualifications for an ELS (balance sheet, trading liquidity, use of proceeds, timing of effective ELF).