Mezzanine Debt

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What It Means

Mezzanine Debt is a form of capital financing that exists somewhere between Senior Debt and equity. It is generally unsecured by assets and, instead, is issued based upon a company’s ability to generate cash, hence it is commonly referred to as cash flow-based lending.

Why It’s Important

Mezzanine Debt plays an important role in many Middle Market Acquisitions. Because it is unsecured, it typically carries a higher Interest Rate than Senior Debt to compensate the lenders for the increased risk. Mezzanine Debt sometimes comes with warrants or similar instruments, to make the debt more valuable for the lender.

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