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https://www.prudentialprivatecapital.com/posts/the-value-of-mezzanine-financing
https://www.pricoaprivatecapital.com/posts/the-value-of-mezzanine-financing

The Value of Mezzanine Financing

August 30, 2018
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The fundamental characteristics of mezzanine financing can benefit companies in a variety of ways. Discover how.

Pricoa Capital's Mark Hoffmeister, Matt Harvey, Steve Szejner and Julie Langdon describe how mezzanine financing can provide value to companies.

The fundamental characteristics of mezzanine financing benefit companies in a variety of ways, but the value can be largely attributed to it being less dilutive, the flexibility it provides as well as its patient nature.

When raising capital, most business owners strive to minimize the amount of equity they have to give up – mezzanine financing enables them to do this by maximising total leverage with little to no equity dilution. A mezzanine-led recapitalisation typically results in the existing shareholders retaining majority control of the company as well as controlling the board and management.

With mezzanine financing, the investor can provide capital beyond what a bank would typically be comfortable underwriting, thus, providing companies with the flexibility to achieve goals that require capital outside the limits of senior debt.

One of the key benefits of mezzanine financing is that it is patient during times of difficulty. Mezzanine financing is subordinate to the senior debt, from a structural standpoint, and does not usually require any amortisation prior to maturity. Mezzanine financing also typically has a 7-8-year bullet maturity. This keeps the senior lenders comfortable as well as gives management the time needed to deal with any issues that arise before having to address that maturity.

Ultimately, mezzanine financing allows business owners to maintain control and fund growth goals or other needs beyond what their senior debt capacity will allow, while serving as a patient piece of capital in the background.

This document does not take into account individual circumstances, objectives or needs, nor is it intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services.  This document does not constitute investment advice and should not be used solely as the basis for any investment decision.
This article represents the views, opinions and recommendations of the author(s) regarding the economic conditions, asset classes, securities, issuers or financial instruments referenced herein. Distribution of this information to any person other than the person to whom it was originally delivered is unauthorised, and any reproduction of these materials, in whole or in part, or the divulgence of any of the contents hereof, without prior consent of Pricoa Private Capital is prohibited. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Pricoa Private Capital has no obligation to update any or all of such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy or accept responsibility for errors. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services and should not be used as the basis for any investment decision. Past performance is no guarantee or reliable indicator of future results. No liability whatsoever is accepted for any loss (whether direct, indirect, or consequential) that may arise from any use of the information contained in or derived from this report. Pricoa Private Capital and its affiliates may make investment decisions that are inconsistent with the recommendations or views expressed herein, including for proprietary accounts of Pricoa Private Capital or its affiliates.
The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients or prospects. No determination has been made regarding the suitability of any securities, financial instruments or strategies for particular clients or prospects. For any securities or financial instruments mentioned herein, the recipient(s) of this report must make its own independent decisions.
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