Mezzanine financing is a capital resource that sits between senior debt and equity in the capital structure and features the best of both worlds. When companies have maximized their senior debt borrowing capacity, and want to raise additional capital without depleting future senior debt capacity, they are typically left with two options: raise outside equity or utilize mezzanine financing.
From a structural standpoint, mezzanine financing is subordinate to senior debt, and does not usually require any amortization prior to maturity. With a 7-8-year bullet maturity, mezzanine is what we call patient capital – meaning that it supports growth, while also being less costly than direct equity issuance. A mezzanine-supported recapitalization is also an attractive alternative to an outright sale of the business or an equity raise, enabling owners to maintain control.
While it’s certainly not as well-known as other types of capital, we think you’ll find mezzanine to be an option well worth being acquainted with – and we can help you with just that.
Hear Julie Langdon, Mark Hoffmeister, Matthew Harvey, and Steve Szejner share how mezzanine can transform businesses.
- Subordinated debt: $10 million - $100+ million
- Preferred equity: $10 million - $50+ million
- Growth capital
- Leveraged buyouts
- Management buyouts
- Shareholder buyouts
- Balance sheet restructurings
- Principal repaid after senior debt has been fully amortized
- Combination of cash coupon and deferred interest
- Nominal warrants representing minority stake in issuer
- Patient capital
- Maintain control of the business
- Fund growth, acquisitions, or other needs beyond what their senior debt capacity will allow