is Mezzanine Finance?
is corporate debt that, from a
perspective, ranks behind senior debt finance such as traditional bank
loans and overdrafts, but ranks in front of equity investment. This
increased risk and the fact that there is little or no security
available, means that a higher investment return is required. The
return may be in the form of a higher interest rate, or equity
participation, or some other form of deferred payout.
This two-day interactive
course offers a practical study of the techniques and pricing of
mezzanine, subordinated and equity-linked debt with a special
emphasis on smaller and private companies.
workshop will include case studies of actual deals, showing how
mezzanine debt can serve as a
catalyst to help an enterprise or project to get started or raise
capital. We'll use
lecture-discussions, spreadsheet analysis, deal memorandums and
exercises. These will give participants the opportunity to demonstrate
understanding of techniques that can be employed in structuring
transactions in the future .
Features of the Course
What can participants expect to gain from this course?
or update knowledge of required rates of return, cost of capital, and
- Identify the key elements of mezzanine
- Be able to identify appropriate
subordinated and mezzanine financing techniques for particular
- Work out appropriate rates of return for
risks taken, and how to structure the payment of these returns
- Perform a cash flow analysis to model the
senior, mezzanine and equity paydown
- Learn post-deal mezzanine loan management,
restructuring and exit decisions.
participants will be provided with a package of
useful for developing mezzanine financing proposals, including
pertinent articles, case studies based on
actual deals, and sample
|| Corporate Finance: Debt, Equity and Mezzanine
- What is Mezzanine Finance, and where
does it fit into a company's financing structure?
- Why mezzanine for private companies?
would a bank participate in more than one level of the capital
- Introduction to The Mezzanine Matrix
- Mezzanine example: Dubrovnik Eyewear
- The investor's required return on
debt and on equity
- The corporate cost of funding:
techniques of effective cost analysis
- Cost of capital analysis
(Example: WACC for a private company)
- Cost of funding with debt, equity and
- Use and pricing of debt-with-warrants
study: Singapore Land warrant-linked loan facilities. Why did
this company use warrants in its debt financing?
- How would we estimate a company's
effective cost of financing? Application to Dubrovnik Eyewear)
- Putting it together: WACC with
convertibles and hybrids
- Convertible loans and notes
study: Songa Convertible. We consider a convertible bond to
work out its
pricing and the effective cost to the issuer.
- Convertible preferred shares
Air Convertible. We dissect a convertible to work out its
pricing and the effective cost to the issuer.
- Callable debt: pricing the borrower's
call options and prepayment rights
Deep Ocean. How are these options valued?
- Negotiating mezzanine
and hybrids: what are the key requirements? When should options be
Mezzanine Financing Techniques
- Checklist of senior and subordinated
- Senior secured debt in emerging
markets -- what does it mean?
Example of terms and conditions of a senior secured loan
- Global default and recovery tables
- Second lien versus senior-sub
study: Second Lien Facility. How would you adapt this term sheet
to your client's needs?
- Sale-and-leaseback financing
- Step-up rates, PIKs, participations,
- The structure and pricing of sub debt
Mezzanine. What is the effective cost to the issuer of this
mezzanine debt issue?
- Terms and conditions of a mezzanine
study: The Woodstream Termsheet. Examine this termsheet. Which
features would you, as investor, insist on? Where would you be willing
to give way?
- The warrant financing spreadsheet
- Seller notes:
a useful financing instrument
- An alternative to warrants:
- Issue: how should documents define
exit value? What options to include?
and Debt Capacity
- Debt capacity analysis
for private companies
A private company is looking for a means of financing an expansion in
South Africa. Participants estimate the company's debt capacity and the
- Debt capacity analysis and
computations for leveraged finance
- The 12-step method
- Focus: synthetic ratings and debt
- Modelling the debt paydown cash flows
- Focus: exit strategies
- Introducing mezzanine: the financing
- How to make a mezzanine deal work for
- Performance-linked participation
debt: an alternative form of mezzanine
- The participation financing
Frutas Nicas. What rate of return can you project for DEMF's
investment in Frutas Nicas?
- Setting targets and linking payout to
- The language of the linkage
study: Shanghai Solutions. What are the advantages and
disadvantages of the Contingent Payment Unit in this deal? What are the
- Terms and pricing of the mezzanine in
- Evaluating a funding proposal with
revenue-linked mezzanine debt
study: Suriname Hydropower Services. Can you model the rate of
return on the senior and mezzanine funding for this privatization
- Discussion of appropriate linkage:
turnover, cash flow or profit?
- Post-deal mezzanine management
and ownership transition
- Review: the cost of equity capital
- Hybrid capital notes and senior
- Perpetual notes,
preferred and convertible preferred stock
- Capital finance: temporary or
- Exit possibilities and drag-along
session: Review and analysis
of mezzanine choices
to cost of
to Survive an Earnout
bondsonline.com (corporate bond
advfn.com (corporate financial ratios)
optioneducation.net (option valuation)
(convertible bond calculator)
About the Instructor
born in South Africa, has taught finance at NYU, Columbia, Wharton,
in over 40 countries worldwide for the past three decades. He was
Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The
author of more than fifty articles on international finance, he has
at the International Monetary Fund and the U.S. Treasury and has been a
consultant with numerous corporations and financial institutions in
North and South America, Europe, Asia, the Middle East and Africa. As a
banker and consultant he has been involved in the
growth of the structured finance market in the USA, Europe and Asia. He
is the author
or co-author of The International Money Market, The Handbook
of International Finance, Cases in International Finance,
Global Financial Markets, Asset Securitization in Asia and The
River Watertrail Guide. He and his wife are
the founders of Cloudbridge, a nature reserve in Costa Rica.