Mezzanine capital is understood as a financing that represents a hybrid between equity and debt. This is done with the purpose of meeting certain individual needs on the investor side or on the company side. Maximum flexibility can be guaranteed, particularly when it comes to terms, conditions and repayment modalities.
For example, a solution can be found for a company that does not want to give up voting rights, but also cannot or does not want to afford traditional debt financing.
Depending on the goals pursued, mezzanine capital is either equity-basedor debt-based. The two variants are explained in more detail below.
Equity mezzanine is characterized by the fact that the capital provided by the investor is not secured, therefore it is subordinate and represents equity in an economic sense. This has the decisive advantage that no collateral has to be provided. However, the equity mezzanine capital can form an additional collateral fund with which classic debt financing can then be realized. As a result, inexpensive mixed financing is made possible.
This risk component of the investor is compensated for by individual remuneration models. Usually there is no or only a complementary fixed interest rate, but a certain profit participation. There are various options for profit participation, for example
- Immediate profit sharing in the form of profit participation rights or silent participations
- Exit participations in case of a company sale
- Company value participations
Debt mezzanine is more similar to debt capital, however it is not collateralized or only to a certain extent. Debt Mezzanine thus occupies an intermediate position in the order of liability: debt capital is best secured, Debt Mezzanine is secured to a certain extent and is satisfied before the Equity Mezzanine.
A debt mezzanine lender therefore has more risks than a pure lender, but fewer risks than an equity mezzanine investor.
Remuneration can also be paid using a profit participation scheme, but fixed interest rates are also common, with the amount of the interest rate being calculated according to the risk.
We would be happy to advise you whether a mezzanine capital financing is possible and useful for your company. Thanks to our large network of mezzanine donors, we can serve your individual needs and offer tailor-made solutions at attractive conditions.