Mezzanine Funding

Maturity and Redemption

  • Mezzanine debt typically has a maturity period of 5 years or more. If issued simultaneously with bank debt, the mezzanine debt matures after the bank debt.
  • Given the high rate of return (RoR) offered on mezzanine finance compared to traditional finance, issuers often prefer shorter maturities.
  • Mandatory redemption/prepayment is required in the event of asset sales or a change in control transactions.

Lender Considerations

When reviewing mezzanine financing requests, lenders closely examine several aspects of the prospective borrower’s business:

  • Cash Flow: The company’s capacity to generate sufficient cash flow to repay the loan is the most important consideration.
  • Ownership Flexibility: Lenders look at the ownership structure and its flexibility.
  • Company History: The company’s history and track record are scrutinized.
  • Growth Strategy: The company’s growth strategy and acquisition targets are evaluated.

We understand the intricacies of complex transactions and leverage our extensive network and industry knowledge to optimize your company’s funding structure. With our expertise in hybrid finance and mezzanine financing, we craft tailored strategies to meet your unique capital requirements.

Whether you require mezzanine funding or mezzanine debt, our experienced team is dedicated to structuring the ideal financial solution for your business. We provide personalized, innovative solutions that align with your specific needs, ensuring optimal results and sustainable growth.

Mezzanine Capital

Mezzanine capital fills the gap between equity and senior debt in the capital structure of a company. This gap often arises due to:

  • Discounting inventories, fixed assets, and accounts receivable at higher rates out of fear that they may not realize their value.
  • A high proportion of intangible assets on the balance sheet.
  • Ceilings on the debt that can be raised from a bank.

Need for Mezzanine Finance

Mezzanine capital bridges the gap between equity and senior debt in a company’s capital structure for several reasons mentioned above. This type of financing is particularly useful when traditional debt options are limited or unavailable.

Eligibility

To raise mezzanine finance, a company must have:

  • A credible track record in the industry.
  • Consistent profitability.
  • A feasible plan for expansion through an initial public offering (IPO) or acquisition.
  • Companies with a positive cash flow are ideal candidates for mezzanine finance.