Mezzanine financing
Mezzanine financing.Mezzanine financing, capital, or debt, is a broad financial term. It referrs to unsecured, high-yield, subordinated debt or preferred stock. This represents a claim, on a company's assets, which is only senior to a company's shareholders.Structure of mezzanine financing.Includng the typical interest payment, associated with debt, mezzanine financing often has an equity stake. This is in the form of warrants, attached to the debt obligation. Or, it is a debt conversion feature. This is identical to a convertible bond.Mezzanine financing is a more expensive financing source, for a company, than secured debt, or senior debt. It is more expensive due to increased credit risk. i.e. If there is a default, mezzanine debt is less likely to be repaid, in full. Mezzanine debt is only secured by the equity of the company. It is not attached to the company's tangible assets (e.g., property, cash or accounts receivable). To compensate for the increased risk, mezzanine debt holders require a higher interest payment and/or an equity stake in the company. However, it is a cheaper source of financing than equity, as the current equity holders achieve less dilution. Using mezzanine financing.A financial sponsor uses mezzanine capital to finance an LBO, to reduce the dollar amount of the investment.Early stage companies choose to raise money, with mezzanine capital, if the company does not have sufficient assets for collateral. However, they do not want to risk further dilution, by raising additional equity. There are middle market companies unable to access the high yield market, due to high minimum size requirements. This creates a need for flexible, private mezzanine capital, in the $20 million to $100 million range. In Practice.Typically, mezzanine financing is used to finance the expansion of an existing company. It is usually provided to the borrower very quickly.There is little due diligence, on the part of the lender. There is little or no collateral, on the part of the borrower. This type of financing is aggressively priced. Often, the lender seeks a return in the 20%-30% range. free pics images | LCD vs Plasma | lamp projection TV | good credit score | Lawn Mower Parts Photo Recovery Mac | 32 inch LCD TV | Recover Data | Recover Deleted Files | best web hosting |