Mezzanine Balance | Paper LBO Model
I am not familiar with mezzanine financing but I am interested in knowing why the outstanding balance in Option B of the model keeps increasing each year (45 in Y1 to 50 in Y5).
I thought it would stay at 45 and I would only pay the 12% interest each year. Clearly there are some payments going on as the EB of senior debt is lower each year compared to option A which means that some cash is going somewhere but at the same time the EB of mezzanine is going up.
Link in case the image doesn't load:https://imgur.com/a/BLrR2jF
Forgot to specify, I did not build the model. It's from a case study I found online
Mezz debt usually comes with a non-cash interest (paid in kind) component which gets added to the balance over time, on top of cash interest that is paid.
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