Darby Creek Capital ESOP Fund I invests in 100% ESOP owned businesses. Employee Stock Ownership Program (ESOP) transactions use 100% debt to finance the sale of a company to its employees. We provide subordinated debt that takes the place of equity in a typical private equity deal.
We fund the sale of shares in the company to the ESOP with a loan to the business. Employees then receive shares of the company through the ESOP based on their tenure, and the company repays the loan on behalf of the ESOP. As a result, we enable the employees to build wealth for their retirement at no cost to the employee.
We want to be good stewards of our companies and real partners with our employees. So, we invest in what would be the equity part of the deal in a traditional transaction. Since that makes our investment riskier than average debt, we use warrants to tie our return to the long-term success of the company. We do not invest directly in the equity of the company so it can become 100% employee owned.