What’s mezzanine finance?
I’m interested to know more about mezzanine finance. Can anyone explain to me or give links that can be great sources? All I know is mezzanine finance is a type of junior debt but how does it work? I’ve been wanting to hire this LEXI Finance firm and their mezzanine finance services. I’d appreciate if anyone would reach out. Thanks!
Mezzanine financing is just additional debt that sits behind the senior loan. As you get more and more leverage the terms of mezzanine debt start to look more and more like equity. Generally you can get up to around 75% LTC for a construction deal without the pricing/controls getting too crazy.
It's going to be at a higher interest rate (recent Mezz quotes we've received on MF dev deals are around 10%-12%), have a lot more controls in place to make sure you're not screwing up (tighter budget approvals, stricter cash management agreement, etc.), and it will usually come from a different lender profile (typically specialized debt funds).
Look at their post story. The literally plugging for their own company lol
Ah, that crossed my mind, but didn't check. good to know.
It's the part of your capital stack that pays for building the mezzanine, or loge, section when you build an arena or stadium.
That's why I can never get it, our buildings don't have those.
Mezz - I answered this a while ago. If only WSO App had the functionality to source it efficiently. It's actually amazing they're so unaware of the list of issues and are asking the users for insight, who are all saying the same thing - and have more knowledge than those in charge! Idk if I was charge, I'd be intimately aware of what's going on.
Anyways I found it - see below
Post: Higher Interest Comment: Loanboy043: "mezz is higher
here’s an explanation from oak tree
For middle-market businesses, mezzanine debt typically takes the place of the high yield bonds used by larger companies. As highlighted in figure 2, the minimum issuance size for a company to access today’s high yield bond market is generally $200 million or more. In other words, most middle-market businesses do not have the financing need or the ability to access the high yield bond market. By creating a capital structure with a ‘‘right-sized’’ combination of mezzanine debt and bank borrowings, middle-market companies can leverage their equity capital to generate attractive returns for their owners. Figure 2: Debut High Yield Bond Issuance
Figure 3: Sample Mezzanine Debt Terms • 11-12.5%(11%cash,0-1.5%PIK) • Subordinated unsecured • 6-7 year debt instrument • Purchasedequity • 2-3 points up-front (or via OID) • 1-2yearsnon-call;premiumprepayment schedule thereafter
risks 1st and foremost, mezzanine debt is junior in the capital structure and typically in a first-loss position after the value of the company drops by more than the amount of its equity. Second, since mezzanine debt is provided through privately negotiated transactions, it is far less liquid than more public securities if it needs to be sold. Lastly, middle-market businesses often face greater idiosyncratic risks compared to larger companies. For example, due to their smaller size, loss of a customer or increases in the cost of raw materials may have a larger impact on the borrower’s EBITDA than it would on a larger company. In certain instances, due to their size and ownership structure, middle-market companies may also have less professional or less seasoned managemen
https://www.wallstreetoasis.com/forums/higher-interest
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