Mezzanine debt ranks below senior loans and above equity, so it is riskier and usually pays a higher rate.
What the film says
In private credit, a buyout has three layers of money. Who gets paid back second? Three. Two. One. Mezzanine. Say a deal has a hundred million of senior loans, thirty million of mezzanine, and seventy million of equity. The loans get repaid first, then mezzanine, then equity. So why do investors care? Being second is riskier, so it usually pays a higher rate. Mezzanine is paid for standing in the middle.
In the glossary: Mezzanine
A simple example with round numbers, not advice. Terms vary by fund.
See an error?