How does stretched senior debt work?
Stretched senior debt is essentially just borrowing slightly more leverage than a senior debt facility. This normally allows developers to put less of there own equity into the deal, which should allow them to take advantage of other opportunities. Although it is typically slightly more expensive, the key is to understand the opportunity cost. For example if a developer has £1,000,000 in cash and have the opportunity to use this cash equity into two deals, instead of one. Although this will cost more in interest, hopefully the profit within the deals outweighs the interest cost.
Developers working on more than one project at a time may find stretched senior debt beneficial in order to keep the projects moving. It means that the loan is from one provider rather than a potential combination with a structured funding package.