Mezzanine Financings
Benesch’s Mezzanine Finance Group (the “Group”) represents and advises mezzanine funds, private equity groups, banks, other financial institutions, businesses, borrowers, institutional investors, pension funds and other investors. We counsel clients in connection with effectively handling mezzanine financing in a wide range of complex financing and capital structures ranging along the risk/return spectrum, from later-stage equity transactions to transactions for more established private and public companies. Due to our firm’s deep proficiency in representing senior debt lenders, private equity firms and growth companies on an ongoing basis in both growth and acquisition financings, we understand (both as borrower and lender counsel) where mezzanine debt fits in.
The Group represents clients with various investment approaches, from those who take a “lending” approach to those who take an “equity” approach, or those who take a mix of these two. Our methodology is enabled by, and is the result of, the multidisciplinary team we use to handle mezzanine financing. The Group is composed of attorneys from practice areas including our Commercial Finance & Banking Practice Group, our Private Equity Practice Group and our Corporate & Securities Practice Group.
The Group has extensive experience in documenting, negotiating and administering complex mezzanine and unitranche debt transactions; advising lenders on strategic lending and equity issues and in the day-to-day maintenance of existing credit facilities; and modifying existing loan documentation to deal with changes in a borrower’s business and creditworthiness. We understand the complex tax issues presented by different securities and structures from the perspective of both the borrower and the lender. This includes unique tax issues raised by mezzanine financing terms, such as those derived from the OID (Original Issue Discount), UBTI (Unrelated Business Taxable Income) and AHYDO (Applicable High Yield Debt Obligation) rules. We also understand both the business and legal complexities of the intercreditor arrangements.
The Group’s approach includes careful analysis of equityholder rights and exit strategies at the outset of each transaction. The Group has participated in a significant number of transactions which have matured to exit, with institutional investors (as well as management, private equity professionals and other equity participants) realizing on their investment through sales to strategic and financial buyers, initial public offerings and recapitalization. These successful exit transactions underscore the importance of strategic exit analysis at the outset of every private equity transaction, including the protection of the mezzanine lender’s equity interest through tag-along rights, preemptive rights, rights of first refusal and anti-dilution provisions, as well as registration rights and put rights.
