A form of finance which has characteristics which place it between debt and equity.... more on: Mezzanine finance
A type of second tier funding capital midway between debt and equity in that it offers a higher interest rate than senior debt but provides a lower long term return than equity. This allows large deals to be structured in the best Suitable method for investors and lenders. Often used in management buyouts.
As the name implies, a half way position between equity capital and debt. The UK form of mezzanine finance fills a useful role in transactions such as large buy outs. Those leading the transaction raise as much equity capital as they can and as much senior debt as possible but there may still be a gap. Mezzanine finance can bridge the gap by offering a higher rate of interest than that offered on the senior debt in return for taking on more risk and there is often the added attraction of vouchers to subscribe for equity if the company floats or is sold.
Loan finance that is halfway between equity and secured debt, either unsecured or with junior access to security. Typically, some of the return on the instrument is deferred in the form of rolled-up payment-in-kind (PIK) interest and/or an equity kicker. A mezzanine fund is a fund focusing on mezzanine financing.
Finance that is usually provided by specialist financial institutions that is neither pure equity nor pure debt. It can take many different forms and can be secured or unsecured; it usually earns a higher rate of return than pure debt but less than equity. Conversely, it carries a higher risk then pure debt, but less than equity.
Often a high-risk form of finance, part way between debt and equity. It has the characteristics of debt but may carry a right to shares.
Loans, usually unsecured, which rank after secured or senior debt but before equity in the event of a company failing. To compensate for the greater risk, they typically carry interest one to three percentage points above secured loans and often carry an equity kicker (qv) to give the lender a stake in the equity.
This is often used to bridge the gap between the secured debt a business can support, the available equity and the purchase price. Because of this, and because it normally ranks behind senior debt in priority of repayment, unsecured mezzanine debt commands a significantly higher rate of return than senior debt and often carries warrants (options to buy ordinary shares) to subscribe for ordinary shares. It ranks behind more formal borrowing contracts and is thus referred to as 'subordinated' or 'intermediate debt'.
Business finance following the start-up phase of a business. Less risky, in general, than start up finance.
Companies which are in a growth phase, but may not have access to equity capital or are unwil ing to dilute their existing shareholdings, may use this form of unsecured debt finance provided by merchant banks and development capital fund managers.
A halfway house between equity finance and ordinary debt finance, usually as part of a venture capital finance package. Sometimes unsecured, sometimes secured by a second charge on the company's assets, therefore more expensive than ordinary loans
Provided by merchant banks and development capital fund managers, it is a form of unsecured debt finance aimed at companies which are in a growth phase, but whose equity capital may be inaccessible.
A term used to describe the element of a development capital package which carries a risk/return profile higher than senior debt but lower than equity. It is usually in the form of preference shares or subordinated loan stock.
unsecured debt finance for companies which may not have access to equity capital or traditional bank finance