Morning Class Group 5 - The Concept of Mezzanine Fund

The Concept of Mezzanine Fund

It means the name of all financial products between the senior loan and equity. It is targeted to create stable capital gains through the fixed interest based on the risk of medium level. That is, Mezzanine Fund is ultimately to get moderate risk & high return. In general, mezzanine loans are short-term debt — usually averaging about three years in length — provided by private-equity firms rather than banks. The loans tend to be subordinated debt, exposing investors to more risk than bank lenders have in case of bankruptcy. So to entice investors into mezzanine funds, returns are set relatively high, between 30 percent and 50 percent. Further, the deals often feature warrants, which are options issued by the borrowers that give the lender the right to buy equity at a predetermined price.

• The concept
a) Mezzanine means “half” or “in the middle” by Italian
b) Mezzanine is the name of all financial products between the Senior loan and equity
c) Mezzanine includes
senior loan, Junior Loan, CB, BW, RCPS etc..

• The characteristics of Mezzanine
a) Mezzanine has the risk of medium level compared to senior loan and pure equity.
b) Mezzanine can make it secure the stable capital gains through fixed income such a face interest
c) Mezzanine can be able to have an opportunity of potential capital gain by using options

• The comparison of other financial products


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