Mezzanine Financing Part Two

This is the continuation of Mezzanine Financing video. I gathered my information from Investopedia. If you are interested in reading it for yourself, I strongly suggest you go there for further information on this topic.

Every single day hello everyone and welcome back to my channel i am ginger wolf and this is stripped finance i am a feature entertainer and stripper it’s not a financial consultant so any and all information received from this channel is meant only for educational informational and entertainment purposes so please if you have any questions or concerns take it

Up with your financial consultant now with that out of the way let’s enjoy today’s video bye hello everyone welcome back to strict finance so we are going to be doing part two of mezzanine financing so don’t judge me for playing with my stuffed animals it just it kind of happens i gotta keep my hands moving otherwise i get like really anxious so let’s get

Back to it okay mezzing financing right it’s by adam hayes reviewed by julius mansa and fact checked by kristen roars schmidt not the other word okay let’s not get yelled at by youtube because apparently we’re not fake kids even though this you know this channel i put on every single one of my videos that it’s not meant for children okay i i don’t know i don’t

Get it it’ll be okay though so last time we were here we went over what is mezzanine financing how it works and the financing structure so today we are going to handle maturity redemption advantages disadvantages and some examples right so let’s get back to it let me get comfy here oh oh okay also i still haven’t got to have my harry potter marathon because i’m

Shooting the videos for y’all so don’t judge my slytherin bear okay so a charity redemption and transferability financing typically matures in five years or more however the maturity date of any given issue of debt or equity is frequently dependent on the schedule of maturities of existing debts in the issuers financing structure preferred equity generally does

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Not have a fixed maturity date but may be called by the issuer as of some date after its issue redemption is usually exercise to take advantage of a lower market rate to call in and reissue debt and equity at a lower rate generally the leader in mezzanine financing has the unrestricted right to transfer its loan if the loan involves future distributions and or

Advances the borrower may be able to negotiate a qualified transferee standard as a limitation on the borrowers right to transfer preferred equity and contrast is often subject to restrictions or conditions on transferring the purchaser’s interest in the entity once all the preferred equity has been contributed the entity may permit transfers so portion the

Advantages and disadvantages of mezzanine financing as with any complex financial product or service mezzanine financing has both advantages and disadvantages to consider for both lenders and borrowers i’m getting a random cramp in my arm ouchy i hate when that happens alrighty advantages visiting financing may result in lenders or investors gaining immediate

Equity in a business or acquiring warrants for purchasing equity at a later date this may significantly increase an investor’s rate of return in addition mezzanine financing providers are scheduled to receive contractually obligated interest payments made monthly quarterly or annually borrowers prefer mezzanine debt because the interest they pay is the tax

Deductible business expense thus substantially reducing the actual cost of the debt also mezzanine financing is more manageable than the other debt structures because borrowers may move their interest to the balance of the loan if a borrower cannot make a scheduled interest payment some or all of the interest may be deferred this option is typically unavailable

For other types of debt in addition quickly expanding companies grow in value and may restructure visiting financing loans into senior into one senior loan at a lower interest rate saving and interest cost in the long term as an investor the lender often receives an incentive and additional equity interest or options to obtain such interest a warrant basically

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Sometimes if the venture is highly successful the little add-ons can end up being hugely valuable mezzanine debt also generates a much higher rate of return important in what is still a low interest rate environment mezzanine debt also offers guaranteed periodic payments in contrast to the potential but not guaranteed dividends offered on the preferred equity

That was a lot of work okay like i almost ran out of air there else getting a little light-headed you all right so the disadvantages when securing mezzanine financing owners may sacrifice some control and upside potential due to the loss of equity lenders may have a long-term perspective and may insist on a board presence owners also pay more in interest the

Longer the mezzanine financing is in place loan agreements will also often include restrictive covenants limiting the ability to borrow additional funds or refinance senior debt as well as establishing financial ratios the borrower must meet restrictions on payouts to key employees and even owners are also not uncommon mezzanine lenders are at risk of losing

Their investment in the event of bankruptcy of the borrowing company in other words when a company goes out of business the senior debt holders get paid first by liquidating the company’s assets if there is no asset remaining after the senior debt gets paid off mezzanine lenders lose out finally mezzanine loan debt and equity can be tedious and burdensome to

Negotiate and put into place most such deals will take three to six months to finalize so we have examples in a mezzanine financing example bank xyz provides company abc a maker of surgical devices with 15 million dollars in a mezzanine of financing loan the funding replaced a higher interest 10 million credit line with more favorable terms company abc gained

More working capital to help bring additional products to the market and paid off a higher interest debt bank xyz will collect 10 percent a year in interest payments and will be able to convert the debt into an equity stake if the company defaults bank xyz was also able to prohibit company abc’s borrowing of additional funds and to impose certain financial

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Ratio standards upon it in a preferred equity example in a preferred equity example company 123 issues series b 10 preferred stock with a par value of 25 and liquidation value of 500 dollars the stock will pay periodic dividends when funds are available until the defined maturity is reached the relatively high liquidation value is a takeover defense making it

Unprofitable to acquire the stop for such purposes in general mezzanine loan financing and preferred equity are useful in various situations so guys that is going to be it for this one don’t forget that i do have an upcoming booking in texas so i will be in victoria texas for one week at the maximus gentlemen’s club and then from there i will drive i think it’s

Like seven hours eight hours to wichita falls to the maximus gentlemen’s club there as well i will be going on stage three times a night at 9 11 and one so if you live in texas and you want to see my titties up close and personal right i will be in texas and then all you have to do is just you know come in take a seat and i will blow your mind with my amazing

Talent but that’s pretty much it guys i’ll see you next time and thank you for watching don’t forget to like comment share and subscribe and i’ll see you next time bye hello i am ginger wolf and i am sacrificing your bad decisions to the financial fire so don’t forget to like comment share and subscribe we’ll see you next time bye

Transcribed from video
Mezzanine Financing Part Two By Stripped Finance