Hey All, Apologies in advance for the long post, but I'm in an interesting situation. I'm currently working in a Corp Dev job (about 3 years out of school), but have had serious talks with my grandpa to join his business - think Specialty Industrials company with highly engineered products, does about $12M in Revenue and around $4M in EBITDA. In addition to having serious talks about his business and the potential role I would play going forward, he's contracted me to do consulting work for him over the last year, something that has been mutually beneficial for us both. It's allowed me to get
10 Jun 2021
About I have been a longtime WSO reader (6-7 years) and some years down the track, I thought it would be helpful to do a quick Q&A I think this could be helpful in particular for (i) those looking to switch over from credit to equity investing, (ii) those interested in mezzanine / sub debt, and (iii) those interested in operationally focused / distressed PE Background - c2 years Bulge Bracket LevFin (ANL) - c2 years mezzanine / sub credit investing (ANL / ASO) - c2 years opportunistic / loan-to-own PE, mid-large cap, (ASO / VP)
18 Oct 2019
I'm a VP at a mezzanine fund based in a metro area similar to Minneapolis / Denver / Milwaukee / St. Louis. I have 6 years of corporate banking and debt capital markets experience, 2 years in investor relations at a $2.5B PE fund, and 2 years experience in mezzanine funds. I make a salary of $150,000 / year, no bonus, full benefits, and have 2.0% carried interest in a $250 - $300MM fund size.
20 Jul 2018
This is not a thing, right? I'm just imagining it as a mezz loan. Why would anyone accept mezz with that feature? Seems like you are giving the company away to a potentially predatory party, especially because, in an EOD, the investment will most likely be structured to sever the existing equity if need be. Just sanity checking this. Would be great to hear if you have seen something like this (even in heavily structured circumstances) or if it's just not a thing.
23 Sep 2020
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
15 Jan 2021
They, as the buyout funds, will probably raise a certain amount of money (equity) from institutional investors and provide (invest) that money to PE funds who want to leverage even further their equity returns (above what they would get in a senior debt only deal). So the mezz fund is nothing more than a lender to these guys. For this service, the mezz fund receives an annual interest of ~10%-15% (obviously can vary), which is much higher than what senior lenders get, due to increased risk, and at the end the principal back. For sake of simplicity, im assuming the annual interest is cash-pay
27 Dec 2010
Hello all, I have a presentation from a growth debt fund which invests in senior debt in small early stage companies ($15-30MM tickets). They talk about 15+% gross IRR (YTM) (before carry and management fees). Now, when looking at the investments they have done so far, it always seems to be debt with coupons in the range of LIBOR/EURIBOR + 7%-11% and maturity of 4-5 years. They mention structuring fees of 2-4% and potential additional upside to IRR from warrants, etc. My question is HOW can they achieve 15+% IRRs while providing debt at c.10% coupon? Would their returns not be limited to the
10 Sep 2015
Hey guys, quick question here: Could someone explain what kind of target is good for mezz debt investment in a LBO? Imagine some of the element will be similar (eg: steady cash flow). So guess the real question is, what are the different criteria that you will look at vs. a equity investment in an LBO? Also, what are the key things that you will look at for a distressed debt (special situation) investment? Obviously you need to get convinced by the turnaround story, but anything that is more specific? Thanks. Am having an interview coming up and the company invests in both mezz and distressed other than traditional sponsor equity. Feel free to PM me if you want share the comments privately. Thanks!!!
07 Apr 2011
Question about mezzanine financing: So, I have this mezzanine financing, coupon payments are 10% cash, 5% PIK and there are warrants for say 10% of equity ownership. My question relates as to how do I evaluate this deal? What do warrants represent in a typical PE mezzanine deal? Is it a right to convert some of the loan into equity ownership? If yes, at what rate? I'm not sure I understand what rights a warrant give the mezzanine subordinated debt holder. Thanks!
06 Jan 2012
I work at a top-tier MM PE firm and honestly, I've become a little disillusioned with the amount of shit I have to deal with. Don't get me wrong, my hours are not considered terrible (probably 60-70/week, no weekends), but the entire execution of the deal process is nauseating and repetitive. Since we're swinging for the fences (>3x MOM for new platforms from growth juice/buy-and-build - not looking for 2x MOM on stable cash flow), we typically do a shitload of work and try to uncover every stone. Getting PwC/KPMG/E&Y to build up databases and diligence the shit out of companies always result in finding things that we don't like, which causes us to drop purchase price at the last minute and haggle over the last $5-10 million.
04 Jun 2011
Oasisers, I was looking at a capital structure that was comprised of 2 tranches of senior debt and 3 tranches of mezz below it. The interesting part is that the 1st piece of mezz after the 2 senior tranches has the lowest interest rate in the entire capital structure 6.10%(mezz 1), while the 2 senior above it have 7.04% (sr 1&2) interest rates. The other 2 Mezz pieces below the 1st Mezz rightfully have higher rates at 7.10%(mezz 2) and 8.41%(mezz 3). Can anyone explain how this is possible? To my understanding the more senior you are in the capital structure the lower the cost of debt. In this
10 Feb 2011
Hi guys, Do you think it is feasible over 6 months to be brought up to a competent Associate / Snr Analyst at a 4/5 person Mezz fund, with limited debt experience? I have an offer and need to consider day-to-day, how difficult is the job to be brought up to scratch in order to convert to full-time.. Please note I have c. 1-1.5 year M&A experience but limited practical LBO application and will be the only junior in the team for the first two months (with 3 directors) Many Thanks!
24 Sep 2016
We've funded a few sub notes through one or two of our investors before, but now the rest of our investor network is interested in participating so we're putting together our own little mezz fund. We've just started the process - drawing up an LP agreement currently - but I don't think any of us have gone through this before. Any tips or anything?
15 May 2014
Hedge funders, I'm a credit analyst underwriting bank debt and looking to get some exposure to how the underwriting for bank debt differs from investment grade bonds, high yield bonds, and mezz debt. Does anyone have recommendations on blogs, articles, books, or otherwise to get some exposure to other debt securities? A long term goal would be to be at a credit fund, but for now I'm really just trying to get as much experience and work as hard as I can. If anyone's feeling generous with their time this weekend and wouldn't mind a 15 minute phone call, that would be infinitely helpful too. PMs
21 Feb 2015
From my research, it seems Structured Finance and Mezzanine have pretty good exit ops in hedge funds. But they also are sometimes considered part of Capital Markets, and Capital Markets are considered bad for exit opts. Can someone clear up this confusion? Also LevFin has good exit ops, but LevFin is sometimes considered part of DCM in some banks. But DCM is known to have bad exit ops. Or is DCM only for investment grade and not high yield?
04 Dec 2010
I'm a 2nd year analyst at a large bank (think JPM, BOA, WF). I'm not in ibanking - we target the middle market and provide bank debt facilities >$35MM, mostly used for M&A but also can be direct to the Company. I want to find a pre-MBA associate role with either a PE or mezz debt fund (I actually prefer mezz and think my odds are higher there given my debt background). I do a lot of networking and have gotten some advice already, but want to know what you guys think: 1 - what is the time frame for recruiting? have I already missed it? I've only had one mezz interview so far, and I want to know if I should continue studying for the GMAT or stop and focus on the job hunt before I start my third year.
22 Apr 2014
Hey guys, I stumbled upon this database of mezzanine funds and thought you monkeys might get some use out of it. Posting in the PE forum because I came across it when looking for capital providers to expand financing relationships at my old shop, but I'm sure it can also be leveraged for recruiting purposes. GetMezzanineFinancing Can't vouch for the completeness/accuracy, but I did some spot checks and they seem to check out. The site layout isn't ideal for sorting -- fund profiles are essentially blog posts, you can't filter but the
16 Aug 2019
Hi guys, 4 easy questions for the pundits here :) 1. Is it usual that a "growth equity investment fund" charges an arrangement fee? 2. What's the difference between a Mezz lender and Growth investor that wants to invest via participating preferred shares which resembles a PIK term loan + warrants) 3. Would a high company valuation associated with the preferred shares limits the ability of hte company to raise additional capital later on? 4. I am sure Mezz lenders would have a lien on the assets which the participating preferred shares holder wont have but from an economic perspective couldnt
05 Apr 2019
Anyone have any insight into compensation? Tasks include: (i) monitor portfolio, (ii) analyze portfolio company financial statements, loan covenants and other credit factors, (iii) prepare financial updates and quarterly valuation materials for investment team, and (iv) participate in new underwriting activities. Years Experience Desired: Up to 5 years (related commercial MM underwriting or portfolio management).
16 Apr 2015
Hey - How do the people on this forum think about Mezzanine funds (i.e. the guys who put in junior debt capital alongside sponsors in private equity deals, but also in other situations)? I am looking for anybody that works there or works with these types of funds to talk about what exactly they have the mandate to do, what skills a pre-MBA associate can expect to gain, and how exit opportunities are (b-school, other shops, etc.). As it has been communicated to me, you get to do some of the same analysis as sponsors because you are putting in capital too, and you get to do more deals because there is not as much monitoring (preservation of capital vs. home run returns). However, does not seem to be driving the process, kind of a one-off and not as rigorous an analysis. Also - does anybody have any thoughts on Solar Capital (mezz fund in NYC)? Any input you guys have would be greatly appreciated. Thanks a lot.
11 Jun 2010
My firm is talking with a potential client for M&A advisory. They sound like they want an MBO, but I've only seen outside firms buy other companies. I know this will probably be a leveraged buyout and I've seen that process, but I don't know about the potential need for mezzanine lending. How do you start the process of reaching out to Mezzanine lenders without an existing network? Are they looking for a similar process to financial buyers (prospect, pitch/teaser, NDA, CIM, negotiation/DD) or is there more to that? Who and what are they looking for?
25 Oct 2017
How are the hours/comp/exit opps/reputation of this industry in general? how about for well known shops like cw capital, torchlight investors, LNR capital, C-III and the like? Is this generally a good launch pad for a career in real estate debt? i'm interested in how this kind of career would compare to mezzanine. Is one typically 'better' to start out with or to know? is one typically harder to break in? i can't find any info comparing the two anywhere, would really appreciate some info. thanks
06 Aug 2012
I'd like to come up with a list of the biggest mezzanine funds out there. i'd appreciate if you guys could just throw some names at me of funds that (exclusively) provide mezzanine capital to firms.
13 May 2010
Hey, I'm doing some research into the different avenues for raising capital for a new fund. Would anyone have any insight into whether anyone specialises in providing fund capital? More specifically a mezzanine fund. From what I've seen so far the options seem to be placement agents, distribution desks in large banks, funds of funds and seemingly some private equity houses have also gotten into this area. I'm just getting the feeling I might be missing some group specifically designed for this area, in that all the do is look for start-up funds to invest in. Does such a place exist? Are there
14 Jun 2010
Friends, Which sources do you use to learn spreadsheet modeling of debt (senior, sub, revolver, LoC, Mezz etc) ? And then computation of ratios - Fixed charge coverage, Debt-to-Total Capital, Interest Coverage etc and if the borrower is going to trip a covenant or not ? Vix
17 Nov 2008