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Overview
What is Mezzanine Financing?
Mezzanine financing is a capital resource that sits between senior debt and equity in the capital structure and features the best of both worlds. When companies have maximized their senior debt borrowing capacity and want to raise additional capital without depleting future senior debt capacity, they are typically left with two options: raise outside equity or utilize mezzanine financing.
The direct lending market has become a permanent source of capital for borrowers. It is largely a leveraged buyout-driven, sponsor-led market, but relies on private placement-style credit and terms underwriting.
Who We Work With
Our Team
Donald Campbell
Managing Director, Europe & UK Junior Capital
William Engelking
Managing Director, North America Corporate Mezzanine
Mark Hoffmeister, CFA
Managing Director, North America Corporate Mezzanine
Nikolas Miller, CFA
Executive Director, North America Junior Capital
Eric Seward, CFA
Managing Director, Corporate Mezzanine
Steve Szejner, CFA
Managing Director, North America Corporate Mezzanine
Related Insights
Understanding Mezzanine Financing
- Subordinated debt: $10 million to $100+ million
- Preferred equity: $10 million to $50+ million
Mezzanine Financing can be leveraged for multiple different financing objectives, including:
- Recapitalizations
- Growth capital
- Leveraged buyouts
- Management buyouts
- Acquisitions
- Shareholder buyouts
- Refinancings
- Balance sheet restructurings
- From a structural standpoint, mezzanine financing is subordinate to senior debt and does not usually require any amortization prior to maturity. With a 7-8-year bullet maturity, mezzanine is what we call patient capital – meaning that it supports growth, while also being less costly than direct equity issuance.
- PGIM’s mezzanine financing features a combination of cash coupon and deferred interest, with nominal warrants representing a minority stake in the issuer.
Companies choose PGIM for mezzanine financing due to the financing solution’s patient nature, and its ability to fund growth, acquisitions, or other needs beyond what their senior debt capacity will allow while still allowing them to maintain control of their business.
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