mezzanine debt

mezzanine debt
Debt finance that ranks in priority behind senior debt but ahead of trade creditors or equity; often secured and commonly convertible into equity of the borrower. There is generally a bullet repayment and there may be early prepayment premiums. Mezzanine loans often benefit from share or equity warrants which give mezzanine lenders a share in any equity upside in the transaction.
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USA
Also known as mezzanine financing.
Debt that ranks in priority behind senior debt but ahead of trade creditors or equity; often unsecured, high yield, subordinated debt and commonly convertible into equity of the borrower. This debt is typically subject to a bullet repayment and possibly prepayment premiums. Mezzanine loans are a more expensive financing source for a company than secured debt or senior debt because they are riskier to the lender.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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