Another fine mezz
LBO market braced for messy restructurings
It has a blend of equity and junior debt characteristics and is deeply subordinated. At the height of the market, mezz loans were being placed at 8% to 9% which, not surprisingly, many funds say simply did not reflect the risks involved. Mezzanine’s revival in the wake of the credit crunch has seen leverage pull back by a full turn and pricing harden by an average of 1%. Upfront fees for senior tend to range from 2.25% to 2.375% and for mezz are more like 2.5% to 2.75% or 3% in some cases.
Considering the volatility that has persisted in the loan market it is hardly a surprise that pricing is inconsistent. "There is now a big variance in mezz pricing," says Nick Soper, head of debt advisory at Investec Investment Banking in London. "We...
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