Subordinated Debt

Subordinated debt, also called mezzanine debt, is often used in leveraged acquisitions, in conjunction with senior debt (provided by banks or institutional investors) as well as common or preferred stock. Mezzanine financing is also used for growth capital, either exclusively or in conjunction with equity securities. Subordinated debt is typically a component of a more comprehensive debt structure. Transaction structures can be highly complex, sometimes including equity warrants in addition to interest and principal payments. Most mezzanine lenders do not require principal amortization in the first few years.

The transaction size for traditional private subordinated debt issuance can be as low as $2 million or as large as $50 million or more.

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