Lenders rewrite their terms of engagement
LBO market braced for messy restructurings
MEZZANINE FINANCING IS often described as a sponge – essentially a flexible buffer between the senior debt and the equity. In recent years, this description became unintentionally apt as mezz was relentlessly squeezed by larger and larger senior debt tranches with growing amounts of second-lien debt inserted directly underneath them – and above the mezzanine layer.
Between 2004 and 2007, senior debt was abundant and cheap and leverage multiples high – all of which spelled bad news for mezzanine.
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