Hi guys,
I'm not sure how mezzanine debt works. Would mezz debt be categorized under corporate finance?
Also, is it possible for mezz debt to be converted to a majority equity stake in a company? My understanding is when the borrower has poor financial performance and defaults on the mezz debt, the lender takes over the firm in a "buyout like" scenario, and turns around the company and exits via a sale later down the road.
I'm not sure if this actually happens, or how often it happens.
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This post is a bit lost. Mezz financing can be a hybrid debt/equity if there are convertible options into equity on the debt and/or warrants tied to the debt piece. Nevertheless, if there is a default on the mezz, most often the mezz lender is subject to restrictive Intercreditor standstill and subordination rights precluding it to enforce any remedies under an EoD while the senior is outstanding. In a CH11 scenario, the mezz functions exactly as it is, subordinate financing and is junior the senior's recovery and primes the unsecureds. Yes the mezz is collateralized by the equity and it can foreclose on the equity ultimately and take over the company outside a CH11, but most often that will be prevented by a CH11 filing by the company to prevent the foreclosure.
In a workout, it really depends on the relative size of the senior and mezz tranches, the assets of the company, etc. For the mezz to "take control" they would likely have to buy out the senior debt to get them to walk away and then wipe out the equity. In a "normal" workout, the mezz gets almost nothing and definitely not control of the company.
People need to stop getting hung up on terminology. "Mezz" doesn't mean anything other than that it ranks between senior debt and equity.
And OP please ignore the two posts above because neither has a clue about restructuring. You don't "foreclose" on equity -- namely, because a company doesn't own its own equity and hence cannot pledge it -- and you don't need to buy out a senior lender to take control in a restructuring if you're the fulcrum.
[quote="mrb87"]
People need to stop getting hung up on terminology. "Mezz" doesn't mean *anything* other than that it ranks between senior debt and equity.
And OP please ignore the two posts above because neither has a clue about restructuring. You don't "foreclose" on equity -- namely, because a company doesn't own its own equity and hence cannot pledge it -- and you don't need to buy out a senior lender to take control in a restructuring if you're the fulcrum.
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mrb87 is on point. I've never heard of mezz debt having that type of option, from what I've seen so far most mezz debt investors just tend to get wiped out pretty early in the case of a default/reorg. In this type of scenario the mezz tranche is just converted to common equity (which is usually worthless at that point).
like i said, it depends on the relative size of the tranches and the assets of the company
Mezz Debt Fund (Originally Posted: 10/05/2016)
I am coming up on an interview for an analyst position at a Mezzanine Debt Fund. I wanted to see if anyone hear had any interview advice that would be specific to this type of firm.
Any and all advice is appreciated.
Thanks!
What city/region is it in?
Can you be any more specific without giving the group away? Independent fund? Part of a larger platform? What region of the country? Size?
Make sure you understand how to model Term Loan A / B, unsecured debt, first lien / second lien debt, preferred equity, convertible notes, equity kickers like warrants, etc... also you should be able to explain the pros/cons of each type of security, how they usually rank in the capital structure, typical cost of capital for each, and what types of companies / assets / projects are good candidates for each type.
Also, learn this document forward and backwards: drive Dot google Dot com/open?id=0B5kt7h40ox99aUs0d3NuZW9GQWc
Study material for mezz-debt fund roles? (Originally Posted: 03/05/2015)
Hi guys:
Just curious, are there any study guides/interview guides for mezz-debt roles? Didn't see much when I tried to search online; my background is in high yield public market debt so I'm hoping to get a guide like that to make sure I'm not missing any of the technical knowledge.
Thanks
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