Definitions of mezzanine debt
a debt taken on to finance a business that involves a high rate of interest with the right to buy shares in the business in the future
BC Partners purchase of Foxtons for £380m was financed by £180m of senior debt, £70m of mezzanine debt and £130m of equity.
Phrase Bank for mezzanine debt
“Combined Debt Service” means, for any period, the sum of (a) Debt Service, and (b) Mezzanine Debt Service.
“Permitted Mezzanine Debt” shall mean one or more mezzanine loans procured after the Closing Date by the Persons owning interests in one or more of the Borrowers.
Such Alternate Fund shall target … mezzanine debt investments in growth companies.
Barings announced that it served as lead agent and provided mezzanine debt and an equity co-investment to support J.F. Lehman.
Investment banks are piling into mezzanine debt tranches in search of higher yields.
Additional Notes for mezzanine debt
Also known as mezzanine financing. Mezzanine financing relies on very high interest rates in the 20-30% range to make it profitable. Unlike a bank loan, mezzanine financing does not hold real assets of a company as collateral; instead, lenders offering mezzanine financing have the right to convert their stake to an equity or ownership in the event of a default on the loan.
Mezzanine financing is often used for large projects when senior debt providers will not provide all of the funding required as they wish other parties to take on some of the risks of the project.
In terms of repayment, mezzanine debt is ranked below senior debt but above equity.