Mezzanine Financing – Encyclopedia – Business Terms #cars #0 #finance


#mezzanine finance

#

Mezzanine financing is a hybrid between debt and equity. In a multi-tiered financing of an operation, for instances, the sources of money will be senior debt, senior subordinated debt, subordinated debt, mezzanine debt. and finally the owner’s own equity. In other words, the mezzanine lender is very close to being last to get paid if something goes wrong.

Mezzanine financing is a loan to the owner with terms that subordinate the loan both to different levels of senior debt as well as to secured junior debt. But the mezzanine lender typically has a warrant (meaning a legal right fixed in writing) enabling him or her to convert the security into equity at a predetermined price per share if the loan is not paid on time or in full. Many variants exist, of course, the most common being that a portion of the money is paid back as equity. Being unsecured and highly subordinated, mezzanine financing is very expensive, with lenders looking for 20 percent returns and up. Unless a market is very flush with money and “irrational exuberance” reigns (to use a phrase coined by the retired chairman of the Federal Reserve, Alan Greenspan), the mezzanine lender will be reluctant to lend unless the company has a high cash flow, a good history of earnings and growth, and stature within its industry. Mezzanine is decidedly not a source of start-up funding. Major sources of mezzanine financing include private investors, insurance companies, mutual funds, pension funds, and banks.

MEZZANINE MECHANICS

Financing programs or acquisitions by this mechanism typically involve some combination of lending by the source of money and provision of equity by the borrower. The narrowest case is one in which the lender lends cash and gets a warrant to convert the loan, or portions of it, to stock either any time at the lender’s option or in the case of partial or complete default. More usually the following conditions prevail: A sum of money changes hands. Most of it is lent to the borrower at an interest rate but a portion of it is in the form of a favorable sale of equity. In addition there may also be a warrant for the lender and restrictive covenants under which the lender is further protected. The loan will typically fetch an interest rate well above the prime rate and will be for a period of four to eight years.

In the ideal case, the mezzanine financier anticipates earning a high interest on the loan and rapid appreciation of the equity he or she has acquired (or can acquire at a low price with the warrant). Mezzanine financing is typically used in acquisitions based on leveraged buyouts in which all of the investors, not least the mezzanine financier, anticipate cashing out by taking the business public again and refinancing it after the acquisition. Thus the equity can be turned into cash with a substantial gain on the capital. In the event of a failure, the mezzanine lender has little recourse except to influence the company’s turnaround by using its stock acquired by means of the warrant.

The borrower turns to mezzanine lenders because he or she cannot acquire capital by other means for lack of collateral or because its finances cannot attract less expensive lending. The price of the money, of course, is high due to high rates of interest, but the owner is betting on being able to repay the loan without yielding too much control.

THE PROS AND CONS

Advantages

  1. The owner rarely loses outright control of the company or its direction. Provided the company continues to grow and prosper, its owners are unlikely to encounter any interference from the mezzanine lender.
  2. The method offers a lot of flexibility in shaping amortization schedules and the rules of the borrowing itself, not least specifying special conditions for repayment.
  3. Lenders willing to enter into the world of mezzanine financing tend to be long-term investors rather than people looking to make a quick killing.
  4. Mezzanine lenders can provide valuable strategic assistance.
  5. Mezzanine financing increases the value of stock held by existing shareholders although mezzanine equity will dilute the value of the stock.
  6. Most importantly, mezzanine financing provides business owners with the capital they need to acquire another business or expand into another production or market area.

Disadvantages

  1. Mezzanine financing may involve loss of control over the business particularly if projections do not work out as envision or if the equity portion of the borrowing is high enough to give the mezzanine lender a larger share.
  2. Subordinated debt agreements may include restrictive covenants. Mezzanine lenders frequently insist on restrictive covenants; these may include requirements that the borrower is not to borrow more money, refinance senior debt from traditional loans, or create additional security interests in the company’s assets; covenants may also force the borrower to meet certain financial ratios e.g. cash flow to equity.
  1. Similarly, business owners who agree to mezzanine financing may be forced to accept restrictions in how they spend their money in certain areas, such as compensation of important personnel (in such instances, a business owner may not be able to offer above-market packages to current or prospective employees). In some cases, business owners have even been asked to take pay cuts themselves and/or limit dividend payouts.
  2. Mezzanine financing is more expensive than traditional or senior debt arrangements.
  3. Arranging for mezzanine financing can be an arduous, lengthy process. Most mezzanine deals will take at least three months to arrange, and many will take twice that long to complete.

BIBLIOGRAPHY

“Are Hedge Funds Squeezing Out the Mezzanines?.” Private Equity Week. 5 December 2005.

Boadmer, David. “Make Way for Mezzanine.” Retail Traffic. 1 January 2006.

deBrauwere, Dan. “Six Major Catalysts of the M
/* 728×90, создано 05.02.11 */
google_ad_slot = “6127977750”;
google_ad_width = 670;
google_ad_height = 90;
//–>

Financy Glossary – The online dictionary of financial terms #vans #on #finance


#finance dictionary

#

Learn to understand your financial adviser

Financial advisers and other finance professionals will some time use financial language that is hard to understand. This is usually due to them being so used to the language that they forget that their clients sometimes have a hard time understanding the terms they are using. Many feel to embarrassed to ask what the language the professional real means and end up making decisions based on less information than they really need to make an informed decision. Some unscrupulous individuals use this tactic to sell financial products such as Warrants. Swaps and CFD:s that are unsuitable for the client they are selling them to.

With this in mind we have created finance-glossery.com. A website where you can look up words and see what your financial adviser is trying to tell or not to tell you. The website is available for all phones with an internet connection and makes it possible to look up a word while in the office of the financial adviser. We do however usually recommend that you ask the adviser to write down all the advice he is giving you. That way you can review the information and look up words in your speed and in your own home. This makes it easier to reflect on what the information means for you.

We never recommend to make a decision right there wile talking to the finance professional. It is always better to sleep on the information before you make a decision. It is a big red flag if the adviser tell you that you have to make a decision right away or miss out. This is never the case if you are looking for a new adviser. A good adviser insists that you take your time before making a decision. A adviser that you have worked with for some time and that you have a good relationship with can sometimes let you in on time sensitive deals. In this case it is not a red flag.

We recommend that you try to get to the point where you no longer need our website. Where you have learned everything we have to teach you. The more you know, the more successful you will become in the finance game.

Most searched terms

Below you can read a short explanation of the most searched terms on our website.

  1. Binary Options: binary options are a type of high risk financial instrument used to speculate on future market movement. A binary option is tied to an underlying asset such as a stock. an index, a currency pair or a commodity. It is the market movements of the underlying financial asset that dictates whether a binary option matures in the money or not. A binary option has to possible outcomes. You lose your entire investment or you make a large profit. Often 80% or more. Read more about binary trading .
  2. Gearing: Gearing is a term that tells you if a company is leveraged or not. It compares the company net debt to its equity capital. This shows you how much debt to company has taken on to leverage higher growth.
  3. Pro Forma Invoice: A type of invoice that is send from one company to another. A Pro Forma invoice is send before any goods are sent out and it is a way to guarantee that the company gets paid for products it sell to another company. This is especially common if the buyer has financial problems and when the two companies lack prior relationship.
  4. Preference shares: A type of shares that give the holder special benefits compared to other stockholders. The benefits can vary between different types of preferred shares. A common benefit assigned to preferred shares is that the holder is guaranteed a fixed dividend each year.
  5. Unsecured loan: An unsecured loan is a loan where the loan taker doesn t provide the loan giver with any security when he borrows money. This type of loan usually carries a higher interest rate than secured loans and you probably know them better by payday loan. personal loan and credit card. This is due to the fact that unsecured loans are associated with a higher risk for the bank than secured loan such as auto loans and mortgages.

Financy Glossary – The online dictionary of financial terms #western #finance


#finance dictionary

#

Learn to understand your financial adviser

Financial advisers and other finance professionals will some time use financial language that is hard to understand. This is usually due to them being so used to the language that they forget that their clients sometimes have a hard time understanding the terms they are using. Many feel to embarrassed to ask what the language the professional real means and end up making decisions based on less information than they really need to make an informed decision. Some unscrupulous individuals use this tactic to sell financial products such as Warrants. Swaps and CFD:s that are unsuitable for the client they are selling them to.

With this in mind we have created finance-glossery.com. A website where you can look up words and see what your financial adviser is trying to tell or not to tell you. The website is available for all phones with an internet connection and makes it possible to look up a word while in the office of the financial adviser. We do however usually recommend that you ask the adviser to write down all the advice he is giving you. That way you can review the information and look up words in your speed and in your own home. This makes it easier to reflect on what the information means for you.

We never recommend to make a decision right there wile talking to the finance professional. It is always better to sleep on the information before you make a decision. It is a big red flag if the adviser tell you that you have to make a decision right away or miss out. This is never the case if you are looking for a new adviser. A good adviser insists that you take your time before making a decision. A adviser that you have worked with for some time and that you have a good relationship with can sometimes let you in on time sensitive deals. In this case it is not a red flag.

We recommend that you try to get to the point where you no longer need our website. Where you have learned everything we have to teach you. The more you know, the more successful you will become in the finance game.

Most searched terms

Below you can read a short explanation of the most searched terms on our website.

  1. Binary Options: binary options are a type of high risk financial instrument used to speculate on future market movement. A binary option is tied to an underlying asset such as a stock. an index, a currency pair or a commodity. It is the market movements of the underlying financial asset that dictates whether a binary option matures in the money or not. A binary option has to possible outcomes. You lose your entire investment or you make a large profit. Often 80% or more. Read more about binary trading .
  2. Gearing: Gearing is a term that tells you if a company is leveraged or not. It compares the company net debt to its equity capital. This shows you how much debt to company has taken on to leverage higher growth.
  3. Pro Forma Invoice: A type of invoice that is send from one company to another. A Pro Forma invoice is send before any goods are sent out and it is a way to guarantee that the company gets paid for products it sell to another company. This is especially common if the buyer has financial problems and when the two companies lack prior relationship.
  4. Preference shares: A type of shares that give the holder special benefits compared to other stockholders. The benefits can vary between different types of preferred shares. A common benefit assigned to preferred shares is that the holder is guaranteed a fixed dividend each year.
  5. Unsecured loan: An unsecured loan is a loan where the loan taker doesn t provide the loan giver with any security when he borrows money. This type of loan usually carries a higher interest rate than secured loans and you probably know them better by payday loan. personal loan and credit card. This is due to the fact that unsecured loans are associated with a higher risk for the bank than secured loan such as auto loans and mortgages.

Basic Finance Terms #corporate #finance #jobs


#basic finance

#

Basic Finance Terms

Asset
A personal financial asset is something you own, and includes cash, savings accounts, and personal property. In a balance sheet, assets such as the value of your home are offset by liabilities, such as your current mortgage.

Balance sheet
A balance sheet is a financial statement that shows your financial assets (such as your savings account and home equity) against your financial liabilities (such as your mortgage, credit card debt).

Budget
A budget is a document that shows your spending goals for the month or year.

Compound interest
Compound interest is interest that is earned on interest that was earned in prior periods. For credit cards or other loans, compound interest is interest charged on interest that was charged in prior periods.

Financial planner
A personal financial planner can help you with your personal financial situation, including investments and savings goals. Fee-only financial planners are paid for the appointment, and do not receive a commission for your purchases.

Gross income
Gross income is the total amount of money that you make, before subtracting expenses and taxes.

Liability
A personal liability is the amount that you owe. For example, many households have their home loan, car loans, credit card bills, and student loans as their liabilities.

Net income
Net income is your earnings after subtracting out expenses (for self-employed individuals) and taxes.

Net worth
Your net worth is the difference between your financial assets and your financial liabilities. If you are in debt, your net worth is likely to be negative.

Tax advisor
A tax advisor is a tax professional who can help you in planning a tax strategy, and can prepare your tax returns for you.

Teaser rate
A teaser rate is an introductory interest rate offered by credit card companies. When the introductory period is over, the rate typically increases dramatically.


Lunns interest free credit terms and conditions #finance #director


#watches on finance

#

INTEREST FREE CREDIT TERMS AND CONDITIONS

Up to 3 Years Free Credit* with only 10% Deposit

Lunn s, in conjunction Secure Trust Bank PLC trading as V12 Retail Finance, is pleased to offer our UK clients the opportunity to apply for free credit for some items that are 750 and over. Please note that some items are excluded from this offer. Only the goods that have the option on their product page are included. We offer six products, all of which are 0% APR Interest Free.

Lunn s can offer you the option of paying by Interest Free Credit in conjunction with Secure Trust Bank PLC trading as V12 Retail Finance, spreading the cost of your purchases over 6,9, 12, 18, 24 and 36 months, with a 10% deposit in-store and online. Exclusions apply.

The table below show representative examples:

*Based on 36 Months – Online and In Store
Purchase amount. 2000
10% deposit (to be paid now). 200
Loan amount: 1800
36 monthly payments of. 50.00
Interest Rate – 0% APR Representative
Fixed Rate of Interest – 0%
Total amount payable. 2000

Purchase amount. 2000
10% deposit (to be paid now). 200
Loan amount: 1800
24 monthly payments of. 75.00
Interest Rate – 0% APR Representative
Fixed Rate of Interest – 0%
Total amount payable. 2000

Pre-check criteria for online and in store purchases

Before completing a credit application, please ensure that you can satisfy ALL of the following criteria:

You have been resident in the UK for at least three years and will continue your residency in the UK;
You are 18 years of age or above;
You, or your partner is, in permanent paid employment (over 16 hours per week), retired (receiving a pension), in receipt of disability benefit or self-employed ;
You have debit or credit card in your name and registered to your address. For online purchases, you may be offered the option to e-sign the credit agreement in which case complete the process as instructed.

For online purchases, we will deliver to your home address only.
You have Bank or Building Society current account details available to be able to complete the direct debit instruction.
That the purchase is for consumer use and not business use.

Please note that exclusions apply. Credit is not available on every item on the website.

Paying with Interest Free Credit option online

Your credit application is made online, by choosing your purchase(s), paying the relevant deposit by credit card/debit card or PayPal and then completing the relevant sections on the V12 Retail Finance application site.

Once you complete this information, your application will be processed, usually within 30 seconds. Once your finance application is approved, you will receive an e-mail advising you of how to download the finance agreement. Please read this carefully checking that all the details are correct.

You may be offered the option to e-sign the credit agreement in which case complete the process as instructed. The whole process only takes a few minutes and is simple and secure.

Your purchase(s) will be dispatched by Lunn s when your signed credit application has been received by Secure Trust Bank PLC trading as V12 Retail Finance.

Paying with Interest Free Credit In store

Once the form is completed, your application will be processed and a decision from Secure Trust Bank PLC trading as V12 Retail Finance will be forthcoming. Usually this is within a few minutes, but on occasion V12 Retail Finance may need additional information to make their decision and this can delay the outcome.

When your application is accepted, your purchase(s) can then be taken home with you.

Please note there are terms and conditions that are applicable when using this facility. Please call us to discuss on 02890 269585.

Note – finance is only applicable to UK residents

John H. Lunn (Jewellers) Limited is registered in Northern Ireland NI003421. Registered office: 9-21 Queen s Arcade, Belfast, BT1 5FE. John H. Lunn(Jewellers) Limited acts as a credit broker and only offers credit products from Secure Trust Bank PLC trading as V12 Retail Finance. John H. Lunn (Jewellers) Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 689989. Credit provided subject to age and status


Mezzanine Financing – Encyclopedia – Business Terms #finance #used #cars


#mezzanine finance

#

Mezzanine financing is a hybrid between debt and equity. In a multi-tiered financing of an operation, for instances, the sources of money will be senior debt, senior subordinated debt, subordinated debt, mezzanine debt. and finally the owner’s own equity. In other words, the mezzanine lender is very close to being last to get paid if something goes wrong.

Mezzanine financing is a loan to the owner with terms that subordinate the loan both to different levels of senior debt as well as to secured junior debt. But the mezzanine lender typically has a warrant (meaning a legal right fixed in writing) enabling him or her to convert the security into equity at a predetermined price per share if the loan is not paid on time or in full. Many variants exist, of course, the most common being that a portion of the money is paid back as equity. Being unsecured and highly subordinated, mezzanine financing is very expensive, with lenders looking for 20 percent returns and up. Unless a market is very flush with money and “irrational exuberance” reigns (to use a phrase coined by the retired chairman of the Federal Reserve, Alan Greenspan), the mezzanine lender will be reluctant to lend unless the company has a high cash flow, a good history of earnings and growth, and stature within its industry. Mezzanine is decidedly not a source of start-up funding. Major sources of mezzanine financing include private investors, insurance companies, mutual funds, pension funds, and banks.

MEZZANINE MECHANICS

Financing programs or acquisitions by this mechanism typically involve some combination of lending by the source of money and provision of equity by the borrower. The narrowest case is one in which the lender lends cash and gets a warrant to convert the loan, or portions of it, to stock either any time at the lender’s option or in the case of partial or complete default. More usually the following conditions prevail: A sum of money changes hands. Most of it is lent to the borrower at an interest rate but a portion of it is in the form of a favorable sale of equity. In addition there may also be a warrant for the lender and restrictive covenants under which the lender is further protected. The loan will typically fetch an interest rate well above the prime rate and will be for a period of four to eight years.

In the ideal case, the mezzanine financier anticipates earning a high interest on the loan and rapid appreciation of the equity he or she has acquired (or can acquire at a low price with the warrant). Mezzanine financing is typically used in acquisitions based on leveraged buyouts in which all of the investors, not least the mezzanine financier, anticipate cashing out by taking the business public again and refinancing it after the acquisition. Thus the equity can be turned into cash with a substantial gain on the capital. In the event of a failure, the mezzanine lender has little recourse except to influence the company’s turnaround by using its stock acquired by means of the warrant.

The borrower turns to mezzanine lenders because he or she cannot acquire capital by other means for lack of collateral or because its finances cannot attract less expensive lending. The price of the money, of course, is high due to high rates of interest, but the owner is betting on being able to repay the loan without yielding too much control.

THE PROS AND CONS

Advantages

  1. The owner rarely loses outright control of the company or its direction. Provided the company continues to grow and prosper, its owners are unlikely to encounter any interference from the mezzanine lender.
  2. The method offers a lot of flexibility in shaping amortization schedules and the rules of the borrowing itself, not least specifying special conditions for repayment.
  3. Lenders willing to enter into the world of mezzanine financing tend to be long-term investors rather than people looking to make a quick killing.
  4. Mezzanine lenders can provide valuable strategic assistance.
  5. Mezzanine financing increases the value of stock held by existing shareholders although mezzanine equity will dilute the value of the stock.
  6. Most importantly, mezzanine financing provides business owners with the capital they need to acquire another business or expand into another production or market area.

Disadvantages

  1. Mezzanine financing may involve loss of control over the business particularly if projections do not work out as envision or if the equity portion of the borrowing is high enough to give the mezzanine lender a larger share.
  2. Subordinated debt agreements may include restrictive covenants. Mezzanine lenders frequently insist on restrictive covenants; these may include requirements that the borrower is not to borrow more money, refinance senior debt from traditional loans, or create additional security interests in the company’s assets; covenants may also force the borrower to meet certain financial ratios e.g. cash flow to equity.
  1. Similarly, business owners who agree to mezzanine financing may be forced to accept restrictions in how they spend their money in certain areas, such as compensation of important personnel (in such instances, a business owner may not be able to offer above-market packages to current or prospective employees). In some cases, business owners have even been asked to take pay cuts themselves and/or limit dividend payouts.
  2. Mezzanine financing is more expensive than traditional or senior debt arrangements.
  3. Arranging for mezzanine financing can be an arduous, lengthy process. Most mezzanine deals will take at least three months to arrange, and many will take twice that long to complete.

BIBLIOGRAPHY

“Are Hedge Funds Squeezing Out the Mezzanines?.” Private Equity Week. 5 December 2005.

Boadmer, David. “Make Way for Mezzanine.” Retail Traffic. 1 January 2006.

deBrauwere, Dan. “Six Major Catalysts of the M
/* 728×90, создано 05.02.11 */
google_ad_slot = “6127977750”;
google_ad_width = 670;
google_ad_height = 90;
//–>

What is Hosting Server? Webopedia Definition #hosting #server, #definition, #define, #what #is, #webopaedia, #webopedia, #glossary, #dictionary, #encyclopedia, #tech #terms, #technology


#

hosting server

Related Terms

A server dedicated to hosting a service or services for users. Hosting servers are most often used for hosting Web sites but can also be used for hosting files, images, games and similar content. Hosting servers can be shared among many clients (shared hosting servers) or dedicated to a single client (dedicated servers), the latter of which is particularly common for larger Web sites where the hosting needs of the Web site owner necessitate more control and/or bandwidth.

See also “All About Web Site Hosting” in theDid You Know. sectionof Webopedia.

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Lunns interest free credit terms and conditions #micro #finance


#watches on finance

#

INTEREST FREE CREDIT TERMS AND CONDITIONS

Up to 3 Years Free Credit* with only 10% Deposit

Lunn s, in conjunction Secure Trust Bank PLC trading as V12 Retail Finance, is pleased to offer our UK clients the opportunity to apply for free credit for some items that are 750 and over. Please note that some items are excluded from this offer. Only the goods that have the option on their product page are included. We offer six products, all of which are 0% APR Interest Free.

Lunn s can offer you the option of paying by Interest Free Credit in conjunction with Secure Trust Bank PLC trading as V12 Retail Finance, spreading the cost of your purchases over 6,9, 12, 18, 24 and 36 months, with a 10% deposit in-store and online. Exclusions apply.

The table below show representative examples:

*Based on 36 Months – Online and In Store
Purchase amount. 2000
10% deposit (to be paid now). 200
Loan amount: 1800
36 monthly payments of. 50.00
Interest Rate – 0% APR Representative
Fixed Rate of Interest – 0%
Total amount payable. 2000

Purchase amount. 2000
10% deposit (to be paid now). 200
Loan amount: 1800
24 monthly payments of. 75.00
Interest Rate – 0% APR Representative
Fixed Rate of Interest – 0%
Total amount payable. 2000

Pre-check criteria for online and in store purchases

Before completing a credit application, please ensure that you can satisfy ALL of the following criteria:

You have been resident in the UK for at least three years and will continue your residency in the UK;
You are 18 years of age or above;
You, or your partner is, in permanent paid employment (over 16 hours per week), retired (receiving a pension), in receipt of disability benefit or self-employed ;
You have debit or credit card in your name and registered to your address. For online purchases, you may be offered the option to e-sign the credit agreement in which case complete the process as instructed.

For online purchases, we will deliver to your home address only.
You have Bank or Building Society current account details available to be able to complete the direct debit instruction.
That the purchase is for consumer use and not business use.

Please note that exclusions apply. Credit is not available on every item on the website.

Paying with Interest Free Credit option online

Your credit application is made online, by choosing your purchase(s), paying the relevant deposit by credit card/debit card or PayPal and then completing the relevant sections on the V12 Retail Finance application site.

Once you complete this information, your application will be processed, usually within 30 seconds. Once your finance application is approved, you will receive an e-mail advising you of how to download the finance agreement. Please read this carefully checking that all the details are correct.

You may be offered the option to e-sign the credit agreement in which case complete the process as instructed. The whole process only takes a few minutes and is simple and secure.

Your purchase(s) will be dispatched by Lunn s when your signed credit application has been received by Secure Trust Bank PLC trading as V12 Retail Finance.

Paying with Interest Free Credit In store

Once the form is completed, your application will be processed and a decision from Secure Trust Bank PLC trading as V12 Retail Finance will be forthcoming. Usually this is within a few minutes, but on occasion V12 Retail Finance may need additional information to make their decision and this can delay the outcome.

When your application is accepted, your purchase(s) can then be taken home with you.

Please note there are terms and conditions that are applicable when using this facility. Please call us to discuss on 02890 269585.

Note – finance is only applicable to UK residents

John H. Lunn (Jewellers) Limited is registered in Northern Ireland NI003421. Registered office: 9-21 Queen s Arcade, Belfast, BT1 5FE. John H. Lunn(Jewellers) Limited acts as a credit broker and only offers credit products from Secure Trust Bank PLC trading as V12 Retail Finance. John H. Lunn (Jewellers) Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 689989. Credit provided subject to age and status


Mezzanine Financing – Encyclopedia – Business Terms #blacklisted #car #finance


#mezzanine finance

#

Mezzanine financing is a hybrid between debt and equity. In a multi-tiered financing of an operation, for instances, the sources of money will be senior debt, senior subordinated debt, subordinated debt, mezzanine debt. and finally the owner’s own equity. In other words, the mezzanine lender is very close to being last to get paid if something goes wrong.

Mezzanine financing is a loan to the owner with terms that subordinate the loan both to different levels of senior debt as well as to secured junior debt. But the mezzanine lender typically has a warrant (meaning a legal right fixed in writing) enabling him or her to convert the security into equity at a predetermined price per share if the loan is not paid on time or in full. Many variants exist, of course, the most common being that a portion of the money is paid back as equity. Being unsecured and highly subordinated, mezzanine financing is very expensive, with lenders looking for 20 percent returns and up. Unless a market is very flush with money and “irrational exuberance” reigns (to use a phrase coined by the retired chairman of the Federal Reserve, Alan Greenspan), the mezzanine lender will be reluctant to lend unless the company has a high cash flow, a good history of earnings and growth, and stature within its industry. Mezzanine is decidedly not a source of start-up funding. Major sources of mezzanine financing include private investors, insurance companies, mutual funds, pension funds, and banks.

MEZZANINE MECHANICS

Financing programs or acquisitions by this mechanism typically involve some combination of lending by the source of money and provision of equity by the borrower. The narrowest case is one in which the lender lends cash and gets a warrant to convert the loan, or portions of it, to stock either any time at the lender’s option or in the case of partial or complete default. More usually the following conditions prevail: A sum of money changes hands. Most of it is lent to the borrower at an interest rate but a portion of it is in the form of a favorable sale of equity. In addition there may also be a warrant for the lender and restrictive covenants under which the lender is further protected. The loan will typically fetch an interest rate well above the prime rate and will be for a period of four to eight years.

In the ideal case, the mezzanine financier anticipates earning a high interest on the loan and rapid appreciation of the equity he or she has acquired (or can acquire at a low price with the warrant). Mezzanine financing is typically used in acquisitions based on leveraged buyouts in which all of the investors, not least the mezzanine financier, anticipate cashing out by taking the business public again and refinancing it after the acquisition. Thus the equity can be turned into cash with a substantial gain on the capital. In the event of a failure, the mezzanine lender has little recourse except to influence the company’s turnaround by using its stock acquired by means of the warrant.

The borrower turns to mezzanine lenders because he or she cannot acquire capital by other means for lack of collateral or because its finances cannot attract less expensive lending. The price of the money, of course, is high due to high rates of interest, but the owner is betting on being able to repay the loan without yielding too much control.

THE PROS AND CONS

Advantages

  1. The owner rarely loses outright control of the company or its direction. Provided the company continues to grow and prosper, its owners are unlikely to encounter any interference from the mezzanine lender.
  2. The method offers a lot of flexibility in shaping amortization schedules and the rules of the borrowing itself, not least specifying special conditions for repayment.
  3. Lenders willing to enter into the world of mezzanine financing tend to be long-term investors rather than people looking to make a quick killing.
  4. Mezzanine lenders can provide valuable strategic assistance.
  5. Mezzanine financing increases the value of stock held by existing shareholders although mezzanine equity will dilute the value of the stock.
  6. Most importantly, mezzanine financing provides business owners with the capital they need to acquire another business or expand into another production or market area.

Disadvantages

  1. Mezzanine financing may involve loss of control over the business particularly if projections do not work out as envision or if the equity portion of the borrowing is high enough to give the mezzanine lender a larger share.
  2. Subordinated debt agreements may include restrictive covenants. Mezzanine lenders frequently insist on restrictive covenants; these may include requirements that the borrower is not to borrow more money, refinance senior debt from traditional loans, or create additional security interests in the company’s assets; covenants may also force the borrower to meet certain financial ratios e.g. cash flow to equity.
  1. Similarly, business owners who agree to mezzanine financing may be forced to accept restrictions in how they spend their money in certain areas, such as compensation of important personnel (in such instances, a business owner may not be able to offer above-market packages to current or prospective employees). In some cases, business owners have even been asked to take pay cuts themselves and/or limit dividend payouts.
  2. Mezzanine financing is more expensive than traditional or senior debt arrangements.
  3. Arranging for mezzanine financing can be an arduous, lengthy process. Most mezzanine deals will take at least three months to arrange, and many will take twice that long to complete.

BIBLIOGRAPHY

“Are Hedge Funds Squeezing Out the Mezzanines?.” Private Equity Week. 5 December 2005.

Boadmer, David. “Make Way for Mezzanine.” Retail Traffic. 1 January 2006.

deBrauwere, Dan. “Six Major Catalysts of the M
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Financy Glossary – The online dictionary of financial terms #suntrust #personal #finance


#finance dictionary

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Learn to understand your financial adviser

Financial advisers and other finance professionals will some time use financial language that is hard to understand. This is usually due to them being so used to the language that they forget that their clients sometimes have a hard time understanding the terms they are using. Many feel to embarrassed to ask what the language the professional real means and end up making decisions based on less information than they really need to make an informed decision. Some unscrupulous individuals use this tactic to sell financial products such as Warrants. Swaps and CFD:s that are unsuitable for the client they are selling them to.

With this in mind we have created finance-glossery.com. A website where you can look up words and see what your financial adviser is trying to tell or not to tell you. The website is available for all phones with an internet connection and makes it possible to look up a word while in the office of the financial adviser. We do however usually recommend that you ask the adviser to write down all the advice he is giving you. That way you can review the information and look up words in your speed and in your own home. This makes it easier to reflect on what the information means for you.

We never recommend to make a decision right there wile talking to the finance professional. It is always better to sleep on the information before you make a decision. It is a big red flag if the adviser tell you that you have to make a decision right away or miss out. This is never the case if you are looking for a new adviser. A good adviser insists that you take your time before making a decision. A adviser that you have worked with for some time and that you have a good relationship with can sometimes let you in on time sensitive deals. In this case it is not a red flag.

We recommend that you try to get to the point where you no longer need our website. Where you have learned everything we have to teach you. The more you know, the more successful you will become in the finance game.

Most searched terms

Below you can read a short explanation of the most searched terms on our website.

  1. Binary Options: binary options are a type of high risk financial instrument used to speculate on future market movement. A binary option is tied to an underlying asset such as a stock. an index, a currency pair or a commodity. It is the market movements of the underlying financial asset that dictates whether a binary option matures in the money or not. A binary option has to possible outcomes. You lose your entire investment or you make a large profit. Often 80% or more. Read more about binary trading .
  2. Gearing: Gearing is a term that tells you if a company is leveraged or not. It compares the company net debt to its equity capital. This shows you how much debt to company has taken on to leverage higher growth.
  3. Pro Forma Invoice: A type of invoice that is send from one company to another. A Pro Forma invoice is send before any goods are sent out and it is a way to guarantee that the company gets paid for products it sell to another company. This is especially common if the buyer has financial problems and when the two companies lack prior relationship.
  4. Preference shares: A type of shares that give the holder special benefits compared to other stockholders. The benefits can vary between different types of preferred shares. A common benefit assigned to preferred shares is that the holder is guaranteed a fixed dividend each year.
  5. Unsecured loan: An unsecured loan is a loan where the loan taker doesn t provide the loan giver with any security when he borrows money. This type of loan usually carries a higher interest rate than secured loans and you probably know them better by payday loan. personal loan and credit card. This is due to the fact that unsecured loans are associated with a higher risk for the bank than secured loan such as auto loans and mortgages.