Mezzanine money is a type of hybrid financing that often has lower priority than a firm's senior debt but typically offers a higher interest rate and often includes warrants.
Structurally, it is senior to equity or common stock but subordinate to senior debt. It can take the form of senior subordinated debt, debt with warrants or preferred equity, or convertible debt.
Mezzanine money is used by firms that are cash flow positive and are seeking money to grow through expansion, recapitalization, acquisitions and LBOs/MBIs. Mezzanine money reduces the need for equity and lowers the overall cost of capital as equity is the most expensive form of capital. Firms that are ahead of the curve can manage to raise significant mezzanine capital without diluting ownership. Mezzanine loan can be a viable funding option for companies not having enough current cash flows or assets to qualify for senior debt. They are typically secured by the same assets as the senior secured debt, albeit on a junior basis. However, on the flip side, businesses become more risky as leverage increases. Mezzanine loans can be negotiated and customized to match individual firm's requirement.
- Insufficient or unavailability of funding from existing resources or investors
- Mezzanine debt is more expensive than ordinary debt and difficult to obtain, especially for smaller businesses, due to lack of control mechanisms and transparency
- Detailed analysis of financial statements to determine suitability of loan type
- Integrated product structuring and loan syndication team with substantial experience in international
leveraged finance and high-yield debt mobilization
- Array of financing options offered including pure debt products such as subordinate debt and participating loans, and equity linked instruments such as convertible bond, bonds with warrants and Payment In Kind (PIK) instruments
- Innovative solutions offered by our consultants are tailor-made to suit business requirements
- V4G has industry wide network with proven track record in debt syndication and risk management that covers all aspects of financing including origination, structuring, syndication and trading in secondary markets
- The leveraged finance team at V4G has the reputation for successfully executing some of the largest and most complex domestic and cross-border deals.
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