Businesses are slowly adjusting to the new post-pandemic normal. While scores of companies have collapsed, some have managed to stay afloat and even scale. For many, access to capital has been the driving factor in their ability to maintain operations.

In this episode of Yield Maintenance, host Brian Coughlan is joined by McGuireWoods private equity partners Dave McLean and Anne Croteau to examine the particulars of mezzanine financing. They provide a general overview of the mezzanine lending marked and break down the details of these financing arrangements and explore the differences between mezzanine and second lien lenders 

They also discuss the current state of the mezzanine financing market and the impact of COVID-19 on the mezzanine market. Although the mezzanine market is typically tied to the M&A industry, which has abated, businesses continue to turn to mezzanine lenders for financing. However, like traditional lenders, mezzanine lenders must ensure deals involve stable and viable companies.

While it remains too early to be certain, Dave and Anne forecast a potential return to the pre-COVID lending environment, although the market may see a more secure mezzanine structure. For mezzanine lenders who want to take advantage of this value opportunity, they advise picking and choosing your investments, with long-term considerations.

Episode Highlights

What is a mezzanine facility? 2:01

Distinction between mezzanine lenders and second lien lenders 8:40

Traditional M&A and debt finance 14:20

Current state of the mezzanine market 25:51

Effects of government stimulus programs on mezzanine lenders 30:48

Pressure for non-bank lenders to move into different product lines 40:01

Outlook for mezzanine lenders post-COVID 42:33

Advice for someone interested in the mezzanine space 46:03

We appreciate you joining us on this episode of Yield Maintenance. If you have a question you would like to ask us or a topic you would like to have covered on a future podcast, please visit our website at mcguirewoods.com. We look forward to hearing from you.

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