In this 2 layer structure, we replace equity with mezzanine debt while accomplishing the same funding objective as a 3 layer structure.
This structure is based on the EBITDA multiple of the proposed debt level and our ability to substantiate the Company's equity value.
As long as the debt multiple is within a certain range and a strong case can be made for excess equity value, mezzanine debt can be raised.
With a mezzanine loan, the company gets money that is significantly less dilutive than straight equity.
In exchange for paying a current interest rate of about 12%, the company is generally able to give up only 5% to 20% of the shares as opposed to giving up over 50% of the shares with a straight equity raise.
Basically, this structure provides capital at a fraction of the cost of a three layer cake structure.
We have the ability to design other structures for either a leveraged recapitalization (partial owner cash out) or an outright sale of the business for the owner.
Our expertise in devising custom structures allows us to deliver significantly lower cost growth capital structures. This creates great value for our clients.
