Mezzanine finance- About Mezzanine finance
Mezzanine financing refers to range of risk and return aspects of whether the priorities identified in the between debt and equity financing as a form of financing. For the company and stock recommendation to a person, mezzanine investments typically provide a very flexible form of longer-term financing, such financing should be less than the degree of dilution of the stock market, and can be adjusted according to specific needs. The mezzanine financing, payments can also be according to the company's cash flow position to determine.
Mezzanine financing - a detailed overview of Mezzanine financing is a non-guaranteed long-term debt, which comes with rights and interests of investors in the financier's option. Mezzanine financing is subordinate to the debt (subordinatedebt) one, but it is often from a subordinate debt as a synonym for use. Mezzanine financing, interest rates generally 10% to 15%, and investors target rate of return is 20% ~ 30%. In general, the lower the interest rate mezzanine, equity option the more.
Mezzanine investment is private equity capital markets (privateequitymarket) an investment in the form of the evolution of traditional venture capital and expansion. In the European and American countries, there is a special mezzanine investment funds (mezzaninefund). If you use the largest possible number of equity and senior debt (seniordebt) to finance, but still have great funding gap, mezzanine financing interest rates on offer at this time, with high priority claims over the same time, bear a higher risk of debt financing. Since mezzanine financing is often to help enterprises improve their asset structure and the rapid increase in turnover, so the right to issue such a form of subordinated debt, while often providing enterprise or acquisition of the shares listed on the right to subscribe.
Mezzanine financing - application conditions Finance companies generally can be considered in the following circumstances mezzanine finance:
1. The lack of adequate cash for expansion and acquisitions;
2. The existing bank line of credit sufficient to support the development of enterprises.
3. Companies have many years of steady growth in history;
4. At least a continuous year (in the past 10 months) has a positive cash flow and EBITDA (did not lose interest, income taxes, depreciation and operating income before apportionment);
5. Enterprises are in a growth industry or account for a large market share;
6.'s Management firmly believe that businesses will in the next few years a great development;
7. Is estimated that companies can be listed within two years and achieve a higher stock price, but the current IPO market conditions or poor performance of the company not sufficient to achieve the desired IPO, so let's make a mezzanine finance the total cost of financing business reduced.
Mezzanine financing and financing the development of the relationship between the Equity financing mezzanine financing as a development financing as part of an overall strategy Mezzanine finance should serve as a development financing as part of an overall strategy to consider, although the cost of the mezzanine financing is not cheap, but sometimes it is the most appropriate mode of financing. Mezzanine financing best suited to MBO, there are mergers and acquisitions plans, be able to grow rapidly and will soon stock listed companies.
The majority of U.S. investment bankers believe that companies must issue 500000-100 million shares outstanding and above in order to ensure the active trading volume and to support a higher stock price. At the same time the stock price must be in the $ 10 - $ 20 above, in order to attract large institutional investors, but less than $ 5 stock is generally not attractive. As the number of shares is very easy to pass, split or Sugu (splitandreversesplit) to change, so the stock price depends largely on their market value.
As the company's market value depends on size of the business, that is, the history of business performance and expected performance, if the mezzanine financing to the enterprise within a year the turnover increased significantly, but also to give the public confidence in the ability of corporate profits, That will make the IPO companies in a better position. Under these conditions, businesses can use mezzanine financing to complete the transition until the implementation and proof of their market value, not to be underestimated in the present value or equity IPO private placement. If an enterprise can be in the future at a higher stock price IPO, which will reduce the overall cost of financing business, which is why companies are willing to pay higher interest rates before the IPO to a mezzanine financing.
