| As a "mezzanine floor" between equity and debt, Mezzanine Finance generally represents debt in a legal sense and (quasi-) equity in an economic sense. This construction provides vast freedom to structure individually tailored hybrid corporate finance solutions.
Especially in Continental Europe, increasing credit restrictions caused by new rules and regulations in banking (e.g. Basel II) and changes in the investment policies of commercial banks impose additional limitations to the corporate financing activities of small and medium-sized enterprises (SME). Simultaneously, Private Equity Sponsors are withdrawing from the market. In this setting, Mezzanine Finance offers a new perspective in corporate finance . Depending on the specific conditions, optimisation of the corporate financing can be achieved by applying different financial instruments. One of the greatest benefits, however, is the financing of projects and enterprises for which a "traditional" finance approach with straight debt and equity can not be realised, either because of the ownership structures or due to an insufficient debt capacity (e.g. as a result of a Leveraged Buyout or an expansion). |
