Mezzanine debt
InvestingDefinition
Subordinated debt in a capital structure — sits between senior debt and equity. Typically used in leveraged buyouts. Yields 10-15% currently. Sometimes includes warrants for equity upside.
If the company defaults, mezzanine recovers after senior debt but before equity. Higher coupon than senior because of higher risk. Sometimes "PIK" interest (paid-in-kind) — additional principal instead of cash, common in stressed situations.
If the company defaults, mezzanine recovers after senior debt but before equity. Higher coupon than senior because of higher risk. Sometimes "PIK" interest (paid-in-kind) — additional principal instead of cash, common in stressed situations.