Mezzanine Loan
What is it?
- It is a type of loan that is junior in payment priority compared to a senior secured loan but is senior to equity. Since this type of loan is typically unsecured, mezzanine lenders focuses on the quality of the company’s cashflows.
- Mezzanine loans are subordinated to claims of senior loan but has priority over equity holders.
What to expect?
- Borrowers must be aware of the key metrics that lenders look for before taking on the loan. Some of these key metrics include, but not limited to, the following: D/E ratio D/EBITDA ratio caps (depending on markets).
- Most mezzanine loans have redemption and call protection provisions in the contract.
- Mezzanine lenders are focused on the ability of the company to consistently generate positive cash flow.
- Mezzanine loans can require corporate and/or shareholder guarantees and may have the option to purchase senior debt.
Who should consider
- Companies who are looking for short-term financing, who have already considered the risks, with interest rates that are significantly high and flexible repayment terms.
- Companies that have a successful track record in repaying debts and are profitable and need additional capital to acquire business or expand profitable business operations.
How Can Bayfront Help
Strategy Review
Detailed analysis of the Client and advise on value-adding corporate strategies.
Structuring
Detailed analysis of the Client’s capital structure and advise on the optimal proportion of equity and debt.
Deal Execution Management
Assisting in execution of deal processes, most commonly in the form of capital raising.
Information Memorandum
For presenting to different target audience such as lenders, new sales relationships, new client relationships.
Governance Review
To determine the specific governance needs of a company and assist in areas which would minimize risks and help achieve business goals.