Mezzanine Background

*****3 COL

Senior Debt
In today’s environment, traditional senior debt can be very challenging to obtain requiring significant collateral including personal guarantees.
Likely Interest rates in the mid- single digits but will include more restrictive covenants.
No Dilution

Mezzanine Debt
Mezzanine Financing is often the best alternative to senior debt and equity. Mezzanine debt is typically more flexible regarding collateral, interest rates in the low to mid-teens, and usually with less dilutive forms of equity such as warrants.
A capital solution that avoids given up large portions of equity.
Limited Dilution

When a company doesn’t have the hard assets or necessary collateral for traditional bank debt, they will often turn to equity.
Equity financing may provide the most flexible liquidity in the short-term but in the long-term may be the most expensive.
Highly Dilutive

(Pyramid Graphic)

• Term & Revolving Loans
• Strict amortization schedules
• Fully collateralized by tangible assets
• Restrictive covenants
• Personal guarantees by principals
• Term Loans – Limited to no amortization
• Positive cash flows required
• More flexible & customized covenants
• May include warrants but less dilutive than equity
• Highly dilutive and often results in loss of control – Board seats
• Longer term capital – No amortization – Highly dilutive
• Usually includes dividends
• Provisions for liquidation, conversion, callability, voting rights
• Longer term capital – No amortization – Highly dilutive