Mezzaninekapital

MezzanineKapital, commonly referred to as mezzanine financing, is a form of capital that sits between senior debt and equity in a company’s capital structure. It carries higher risk and typically a higher return than senior debt, but generally does not confer voting rights and has limited recourse beyond the financed project or company.

Instruments used include subordinated loans, mezzanine notes, and preferred equity. Many mezzanine arrangements feature equity kickers such as warrants, options, or the potential to convert to equity, allowing lenders to participate in upside without immediate ownership transfer.

Mezzanine capital is frequently employed in leveraged buyouts, growth financings, acquisitions, and recapitalizations where founders want to preserve ownership and avoid heavy dilution from new equity. Terms commonly range from four to seven years, with regular interest payments and limited or no amortization in early years; some structures include a bullet repayment at maturity and/or partial amortization. Pricing combines a fixed coupon with an equity upside component, and may include covenants or penalties for late payments.

Advantages for borrowers include higher leverage with less immediate dilution and greater financial flexibility, while lenders gain relatively high yields and protection from junior security interests. Disadvantages include higher overall cost compared with senior debt and higher risk for lenders, as well as potential dilution if conversion features are exercised. The market is served by specialized mezzanine funds, certain private equity groups, and some banks, with terms sensitive to cash flow stability, collateral, and exit prospects.