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Subordinated and Mezzanine Debt

Finance investment bankers at Corporate Finance Associates are also skilled at arranging mezzanine debt, which is subordinate in the capital stack to the company's senior working capital facility, from funds that are positioned to provide Credit Crunch solutions.

While interest rates may be lower on senior asset-based loans, the amount of capital that banks are willing to lend middle market companies has decreased. TIn 2007, senior lenders that were lending 2.5 to 4.5 times EBITDA, are now only lending 1 to 2 times EBITDA, or scaling back credit facilities.

CFA bankers arrange subordinated debt to fill this financing gap, by arranging financing from sub-debt and mezzanine funds that will provide an unsecured loan that is junior to either an unsecured or secured loan provided by a senior lender. Repayment usually starts in the third to fifth year, with final payment due in the seventh to ninth year.

Whereas senior lenders may be collateralized, mezzanine lenders are not. In return for their increased risk, subordinated lenders receive interest on the loan as well as additional yield enhancements, such as stock warrants that allow the debt investor to acquire common stock of the company and have a upside stake in growth potential.

Thus, like TIGRcub™ underwriting, if a middle market company has reliable and growing cash flow, then it also probably qualifies to obtain mezzanine debt. In spreadsheet comparisons, CFA investment bankers can demonstrate to your company the cost of mezzanine capital versus a TIGRcub™ issuance, and in most cases, provide you with proforma Term Sheets.