mezzanine finance?
Discussion
Flicking through the paper today I came a story about a company called Intermediate Capital Group who
"structure and provide mezzanine finance, leveraged credit and minority equity, managing €11.8 billion of assets from third party investors and our balance sheet."
In layman's terms what is mezzanine finance?
"structure and provide mezzanine finance, leveraged credit and minority equity, managing €11.8 billion of assets from third party investors and our balance sheet."
In layman's terms what is mezzanine finance?
I'm sure someone with with more knowledge than cynicism will be along shortly to explain, in the meantime my uninformed guesses and generalisations are;
1. Yet another imaginative way of lending other peoples money whilst creaming off even more profit, adding to the overall costs, all covered up in pseudo important b
ks sales speak.
2. A quick loan at high rates/return with very little questions asked, certainly no due diligence, a bridging loan with bells and potentially only one loser, the borrower. Possibly the sort of loan your friendly villain/gangster down the pub would have provided a generation or so ago, but without the violence.
Not got a clue but enjoyed the chuntering..............
1. Yet another imaginative way of lending other peoples money whilst creaming off even more profit, adding to the overall costs, all covered up in pseudo important b
ks sales speak.2. A quick loan at high rates/return with very little questions asked, certainly no due diligence, a bridging loan with bells and potentially only one loser, the borrower. Possibly the sort of loan your friendly villain/gangster down the pub would have provided a generation or so ago, but without the violence.
Not got a clue but enjoyed the chuntering..............
Generally mezzanine financing will provide short term investment to get to the next stage of corporate development. For example, if a company is filing for IPO and need funds to tide them over then they may take on mezzanine funding to get them there; the lender/investor might look for their return on the upcoming event (for example through liquid stock from an IPO) but may also stick around for longer.
Venture capitalists (like 3i as was) generally have a longer term view and provide funding at earlier developmental stages.
Venture capitalists (like 3i as was) generally have a longer term view and provide funding at earlier developmental stages.
a mezzanine level/floor in a building is one sandwiched between other floors. Mezzanine finance is a type of finance that ranks above equity, but below debt. So if you like it's a type of very subordinated debt. If a company goes bust, any cash/assets left over get paid to senior debt holders first, whereas shareholders (equity) rank last in the queue, usually getting nothing. So mezz is like second to last in the queue.
Fittster said:
Flicking through the paper today I came a story about a company called Intermediate Capital Group who
"structure and provide mezzanine finance, leveraged credit and minority equity, managing €11.8 billion of assets from third party investors and our balance sheet."
In layman's terms what is mezzanine finance?
In laymans terms..."structure and provide mezzanine finance, leveraged credit and minority equity, managing €11.8 billion of assets from third party investors and our balance sheet."
In layman's terms what is mezzanine finance?
If a business is a house...
A private equity buyer/corporate will put in the equity to buy.
They will use bank debt (akin to a mortgage) which will have senior security on any assets (instead of looking at income like a mortgage, they will look at projected cashflows of acquired business).
Mezzanine will be the stretched bit of the mortgage (i.e. higher LTV, higher multiple of earnings - but not to Northern Rock levels!!!) It will be more expensive and will have subordinated ranking on security - i.e. higher risk/higher return.
To support the cashflows, the mezzanine interest can be a mix of cash interest, accruing PIK (payment in kind) interest and perhaps a warrant or co-invest in the equity.
As Tonks says, if the business goes into receivership, payment to the creditors will be senior lenders first, then mezzanine, then equity.
Edited by jdw1234 on Thursday 2nd June 11:40
munky said:
a mezzanine level/floor in a building is one sandwiched between other floors. Mezzanine finance is a type of finance that ranks above equity, but below debt. So if you like it's a type of very subordinated debt. If a company goes bust, any cash/assets left over get paid to senior debt holders first, whereas shareholders (equity) rank last in the queue, usually getting nothing. So mezz is like second to last in the queue.
^ This is the answer. ^Adrian W said:
I remember ABN Amro trying to ram this down our throats ..........look what happened to them
They have been bailed out by the taxpayer no doubt.That is the real problem of the current crisis. All the Banks are still trading as independent business whilst in fact they should be regarded as Nationalised because the entire Banking industry is now ONLY operating because of Taxpayer investment.
Have there been any worthwhile changes?
NO. In the words of Private Eye, Trebles all round and carry on as before.
This is another Banking Crisis waiting to happen. Dippy lending to questionable borrowers. Madness.
Steffan said:
They have been bailed out by the taxpayer no doubt.
Once you posted that, it would have been a good idea to have stopped typing, as you've pretty much just said 'I know nothing about banking".ABN was bought by RBS, at a massively inflated price, then pretty much ceased to exist as a separate entity.
The purchase destroyed RBS, who then were indeed bought by the taxpayer, but ABN, being a foreign sort of bank, never would have been.
As for there being no changes, are you on drugs? There have been absolutely massive changes. Whole teams have been disbanded or created to ensure that risk profiles are changed.
But sadly the vast majority of Directors and senior staff remain as before. The FSA has yet to change the Bank of England is exactly the same the greed and rapacious desire for monstrous rewards without anY personal risk remain the same.
You may be right, I may be wrong but I think the inherent greed of the Bankers is the fundamental problem.
It seems to me that what the Banking industry wants is a world without any personal risk with huge rewards and literally millions of pounds can be earned every year by individuals within banks.
This kind of remuneration is not a salary its a life pension or lottery win every year and no business can readily achieve this.
My prediction is the unrealistic approach of post 2008 collapse in Banking (remember the entire banking industry were broke) with absolute refusal to lend to industry without belt, braces. bicycle clips and both grandparents present, coupled with current Mortgage non lending with the Upfront Mortgage Fees now required with 30%++ deposits before lending and down valuations with onerous interest rates will simply result in the banks failing again.
I see no real improvement in Banking.
Northern Rock were authorised supervised and regulated by the Bank of England and the FSA when they went bust. This was supposedly regulated industry and government controlled. Look at the result!
Time will tell.
You may be right, I may be wrong but I think the inherent greed of the Bankers is the fundamental problem.
It seems to me that what the Banking industry wants is a world without any personal risk with huge rewards and literally millions of pounds can be earned every year by individuals within banks.
This kind of remuneration is not a salary its a life pension or lottery win every year and no business can readily achieve this.
My prediction is the unrealistic approach of post 2008 collapse in Banking (remember the entire banking industry were broke) with absolute refusal to lend to industry without belt, braces. bicycle clips and both grandparents present, coupled with current Mortgage non lending with the Upfront Mortgage Fees now required with 30%++ deposits before lending and down valuations with onerous interest rates will simply result in the banks failing again.
I see no real improvement in Banking.
Northern Rock were authorised supervised and regulated by the Bank of England and the FSA when they went bust. This was supposedly regulated industry and government controlled. Look at the result!
Time will tell.
Oh dear what a load of cobblers, where does one even start with this guy. 1/10.
Steffan said:
But sadly the vast majority of Directors and senior staff remain as before.
FAIL. If you could be bothered even to look at the website of RBS, you'd find that the entire board of RBS is new. All apart from one joined after they were bailed out, and that one is a non-exec director. Since you obviously have never read the financial press, you won't know that 3,000 staff left RBS either.Steffan said:
The FSA has yet to change the Bank of England is exactly the same the greed and rapacious desire for monstrous rewards without anY personal risk remain the same.
and you speak from what experience precisely? Ah that's right, none. Do you even know what the Bank of England is for? Thought not.Steffan said:
My prediction is the unrealistic approach of post 2008 collapse in Banking (remember the entire banking industry were broke)
FAIL. I think you'd find dozens of banks that were not broke. Hundreds, actually. If you were bothered to look into it.Steffan said:
with absolute refusal to lend to industry without belt, braces. bicycle clips and both grandparents present, coupled with current Mortgage non lending with the Upfront Mortgage Fees now required with 30%++ deposits before lending and down valuations with onerous interest rates will simply result in the banks failing again.
I see no real improvement in Banking.
I see someone that has been refused a loan, probably for good reason, and now has a chip on their shoulder?I see no real improvement in Banking.
Steffan said:
Northern Rock were authorised supervised and regulated by the Bank of England and the FSA when they went bust. This was supposedly regulated industry and government controlled. Look at the result!
The Bank of England were not regulating any banks. That wasn't their job. Gordon Brown took that job away from the Bank of England and gave it to the FSA, who indeed failed to supervise Northern Rock. They were probably busy monitoring proper, bigger banks not that it excuses them. Of course if the FSA saved one of the larger banks from going bust you wouldn't know about it, would you? The FSA is a bit like MI5 or special branch in that respect - you almost never hear about their successes, but you certainly hear about their failures.I find the spirited defence of the Banking disaster (first in 120 years) interesting.
Three questions for those who believe that Banking will now be better organised.
Firstly, do you think Banking will return to profitable sustainable business.
I do not.
Secondly do you think the taxpayer will be able to get their investment back in five years? Or ten years.
I do not.
Thirdly do you think that Banking can continue with senior employees receiving in excess of £20,000,000 A YEAR can continue.
I do not.
I think there will be another crisis in Banking very shortly. This is unsustainable.
Three questions for those who believe that Banking will now be better organised.
Firstly, do you think Banking will return to profitable sustainable business.
I do not.
Secondly do you think the taxpayer will be able to get their investment back in five years? Or ten years.
I do not.
Thirdly do you think that Banking can continue with senior employees receiving in excess of £20,000,000 A YEAR can continue.
I do not.
I think there will be another crisis in Banking very shortly. This is unsustainable.
Steffan said:
I find the spirited defence of the Banking disaster interesting.
Because it requires someone to have an IQ in excess of that available to a single cell amoeba?http://www.spectator.co.uk/politics/all/6864613/th...
NoelWatson said:
Steffan said:
I find the spirited defence of the Banking disaster interesting.
Because it requires someone to have an IQ in excess of that available to a single cell amoeba?http://www.spectator.co.uk/politics/all/6864613/th...
Can you not answer the questions?
Steffan said:
NoelWatson said:
Steffan said:
I find the spirited defence of the Banking disaster interesting.
Because it requires someone to have an IQ in excess of that available to a single cell amoeba?http://www.spectator.co.uk/politics/all/6864613/th...
Can you not answer the questions?
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