Mezzanine Debt - An Attractive Option

• Mezzanine debt is patient capital, with little or no amortization, that has a maturity of 6 months to a year outside the Senior debt term.
  
  
• From the borrower's perspective, mezzanine debt is "rented equity" that will assist a company to continue to grow without selling significant control ownership in its company.
  
  
• Mezzanine by its nature is patient debt:
  • matures after senior debt
  • covenants are less restrictive than senior debt
  • structured to be flexible to allow the company to grow (i.e. through acquisitions or working capital) by providing additional liquidity
• Creates the ability for a company to grow and meet expansion plans sooner than possible and create value before giving up equity.
  
  
• Interest expense is fully tax deductible.
  
  
• The Paid In Kind (PIK) interest option allows for cash preservation.
  
  
• A Mezzanine lender does not hold a majority ownership position and is a passive investor in terms of the investment company's day-to-day management.