Making sense of mezzanine financing

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Author: John Sinnenberg
Date: Dec. 2005
From: Financial Executive(Vol. 21, Issue 10)
Publisher: Financial Executives International
Document Type: Article
Length: 720 words

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At critical points in a company's existence, it will need to raise capital--whether to make a strategic acquisition, invest in facilities and technology, create employee stock incentives or provide liquidity for shareholders. Financial executives will look at a range of options from bank debt to equity deals, and everything in between.

In today's market, with institutions and providers ranging from commercial banks to hedge funds competing for business, finding the right source can be as important as finding the right form of financing. It is critical to select a provider whose interests, culture and commitment align with the company's.

Mezzanine capital can fit this critical need, especially for middle-market companies looking for strategic partnership and expertise, without a loss of ownership control. Like debt, mezzanine capital earns an interest rate, can be secured by the assets of the company (generally on a second-lien basis) and has a loan agreement that looks similar to that of bank debt. Like equity, which is longer in term, mezzanine capital has minimal or no scheduled principal payments until the due date and, in some...

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Gale Document Number: GALE|A140306542