Back into the Spotlight: Flexibility of Mezzanine Financing Catalyzing Renewed Interest from Sponsors

Is mezzanine debt back? Steve Ruby and Rahman Vahabzadeh, Co-Heads of Originated Debt, argue it never left. See what’s driving others to revisit the structural advantages of mezzanine financing that empower sponsors to navigate economic uncertainties, scale their businesses, and seize growth opportunities.

Key Takeaways
• Flexibility of mezzanine debt fueling sponsor demand.
• Fixed-rate options can provide an interest rate hedge.
• The blended "all-in" cost of capital for senior/ junior structures can be lower to finance add-ons.
• The partial PIK rate can lower the overall cashinterest burden.
• New tranches can be issued alongside existing senior facilities without triggering MFN clauses.