Unveiling the Benefits of Mezzanine Debt: A Comprehensive Guide
Mezzanine debt is a type of hybrid financing that falls between senior debt and equity. It is typically subordinated to senior debt, meaning that senior debt holders have a higher claim on the borrower’s assets in the event of a default. Mezzanine debt is often used to finance acquisitions, recapitalizations, and other transactions where the borrower needs additional capital but does not want to give up equity.
Mezzanine debt can be an attractive option for borrowers because it offers several benefits. First, it is typically cheaper than equity financing. Second, it does not require the borrower to give up control of the company. Third, it can help to improve the borrower’s credit rating.